Game on here, trade war between the US and China is here

Over the past 16 months America and China have been trading blows...

...through tariffs on goods

We are looking at a reality that has a 25% tariff on every single product...

...that would come in from China

The impact is being felt on industries worldwide

But what is the story behind the America-China trade war?

So the trade war, what have you guys been looking at?

The US doesn't like that China is growing so fast...

...and set to overtake America as the biggest economy in the world...

...if it hasn't already by certain measures

Basically China and the US are caught in this race...

...of imposing tariffs on each other

So the US slaps a high tariff on certain products then China retaliates

It's multiple industries across multiple markets, it's huge

And I think right now would be a really good time to look at what's happened...

...how it could impact the world from now on

At The Economist, we've been covering the trade war extensively

Soumaya Keynes is our trade and globalisation editor...

...based in Washington, DC

How did this whole trade war kick off?

How did this whole trade war start?

For a long time there have been frustrations that...

...past American administrations had with the Chinese

On the 2016 presidential campaign trail...

...you started to see some really tough rhetoric

We can't continue to allow China to rape our country...

...and that's what they're doing

And so he gets into office, his United States Trade Representative...

...that's the kind of official trade negotiator...

...they're working on this big report

So they're essentially investigating China's economic practices

Essentially the question they're asking is...

...has China done anything that would frustrate America's economic interests?

And they find surprise, surprise—yes

How long a history is there of these complaints the US has about China?

These concerns go back for a really long time

And I think to understand them properly...

...you really need to go way back to the expectations that people had...

...when China was thinking about entering the World Trade Organisation

China's economic rise has been dramatic

In 1978 China's GDP at market prices was just 6% of America's

Last year it had grown to 66E00:02:32,760 --> 00:02:34,840 When considering local spending power...

...China has already overtaken America

This unprecedented growth began with President Deng Xiaoping

He started opening up China's economy to the world in 1978...

...and the country quickly became “the world's factory”

Over the next decade, exports as a share of GDP tripled...

...and by 1988 15% of China's exports went to America

The World Trade Organisation opened its doors to China in 2001

And it was America that ushered it in

Bringing China into the WTO is a win-win decision

It will protect our prosperity and it will promote...

...the right kind of change in China

After joining the WTO, China became an economic superpower

But people had expected the country to also become...

...more like a Western capitalist economy

That didn't happen

America now claims that China achieved its growth by not playing fair

Are those claims justified?

To find out the answer, I spoke with David Rennie...

...he's our Beijing bureau chief

There's two ways in which China certainly hasn't been playing fair

One way is just that China treats Chinese companies differently

So, if you are a Western business...

...your Chinese competitor not only has better market access...

...but maybe the land that it built its factory on was given for free...

...maybe it got a giant tax break

...China just doesn't have a level playing field

There's then the really dirty stuff: stealing foreign companies' technology

If you asked Chinese officials about the accusation that...

...China is stealing its way to the top...

...they will say, well hang on, America steals secrets too

So why are you coming after us?

The American government will tell you sure, they spy and they steal stuff...

...but never for commercial purposes

With Donald Trump's election in 2016...

...you had a president who actually set about getting tough with China...

...once he was in office and we never really had that before

The Trump administration has been using tariffs...

...or taxes on imported goods...

...to try to force the Chinese to change their ways

In July 2018 America imposed tariffs of 25%...

...on $34bn worth of Chinese products

That almost doubled the average tariff rate on Chinese imports...

...from 3.8% to 6.7

But with every increase from America, came an increase from China

Since the start of the trade war...

...China has more than doubled its average tariff rate

America's has tripled

The fight has become overtly political...

...because China's tariffs are hitting President Trump's voter base

Many counties where Trump won in the 2016 election were here...

...in the Great Plains...

...and these are the counties most affected by China's tariffs

Someone who knows all about the impact...

...tariffs are having beyond the data...

...is Chad Bown from the Peterson Institute for International Economics

He's been analysing international trade for decades...

...but the trade war has put his research in the spotlight

Some people have referred to it as my World Cup or my Super Bowl

It's something I've been studying in the background for 20 years

And now all of a sudden the world seems to be interested in this

What role do tariffs play in a trade war?

Tariffs are basically a tax...

...but it's a tax that's only paid for goods that are produced...

...outside of the country, in a specific place

One of the things that China has done in its tariffs is...

...it's imposed really high tariffs on American exports of soyabeans

This is a huge product that farmers in Iowa and across the Midwest...

...grow only to sell to China

So, how are these tariffs and...

...the trade war impacting the wider world economy?

I think at some level we're seeing the decisions that businesses make...

...be affected by this

Nowadays, they're not sure what markets are going to be open to them...

...in the future and that's going to impact their investment decisions

The International Monetary Fund, the IMF...

...they expect economic growth to be a lot lower in the future...

...because of the tensions arising during the trade war

The global economy is slowing down...

...and everybody's increasingly concerned about that

As things stand now, a ceasefire in the trade war could be drawing near

The two leaders are hoping to agree on a “phase one” deal soon...

The two leaders are hoping to agree on a “phase one” deal soon...

...which could mean some tariffs being lifted

The Trump administration wants China to buy more American produce...

...and tighten up their intellectual property rules

If that phase one deal is signed...

...will it be the beginning of the end of the trade war?

I took that question back to Soumaya

The Americans are hugely ambitious for the kinds of changes...

...that they would want from the Chinese but...

...those ambitions I don't think will be reflected...

...in the preliminary phase one deal

The Chinese government wants its economy to do well...

...wants its citizens to get richer

The extent that the Americans persist in demanding these big changes...

...to the Chinese economy, it's going to be really difficult to get a deal

Even if there is a phase one deal...

...there will be a lot of issues still to be resolved

But there's more to the trade war than just tariffs

America has also imposed restrictions on some Chinese firms...

...especially ones in the tech industry

We cannot allow any other country to outcompete the United States...

...in this powerful industry of the future

Specifically over one Chinese company

Huawei can offer cheaper prices...

...because they are heavily subsidised by the Chinese government

We've made another film that looks closely at Huawei...

...and why the West is worried about it

It includes a rare interview with Huawei's CEO Ren Zhengfei

I do not really understand America's political motivation

And we looked into how these tensions will impact American industries...

...already dependent on Huawei technology

The biggest issue, I think, with all of this political turmoil...

...surrounding the Huawei name is uncertainty

You can watch the Huawei film right now by clicking on the link opposite

If you want to learn more about the trade war you can click the other link...

...where you'll find all the research we used to make this film...

...as well as other articles we've written...

...including a special report by David Rennie

And as always if you like what you saw, hit that subscribe button