How the U.S.-China Trade War Reached a Turning Point

For months, it appeared a December truce in the trade war between the world’s two biggest economies would clear the way for handshakes and announcement of a resolution. Instead, the U.S. and China are escalating a tariffs feud that has shaken the world economy and caused companies to reconfigure supply chains. Even before U.S. President Donald Trump ratcheted up tariffs on Chinese goods, and China vowed to retaliate, the International Monetary Fund was warning that the global economy is vulnerable to trade tensions.

The Trump administration hiked tariffs on $200 billion of Chinese goods to 25% from 10% on May 10. China, under President Xi Jinping, responded by announcing it would raise duties on 2,493 U.S. products to 25%. Next, Trump may act on a threat to slap duties on all goods imported from China that had been exempted from tariffs until now. U.S. officials contend that China backed away from commitments it made at the negotiating table by balking at the prospect of changing Chinese laws to solidify the reforms the Trump administration had been pushing. For its part, Beijing is accusing the U.S. of reneging on a pledge not to raise tariffs further while talks were going on.