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How will tensions between China and the United States affect trade?

Published 10 August 2022

Will Speaker Pelosi’s visit to Taiwan lead to long-term disruptions in trade? Local protectionism continues to pose problems for economic growth. And, how India can realize its great power ambitions.

US House Speaker’s visit to Taiwan rattles China

Will Speaker Pelosi’s visit to Taiwan lead to long-term disruptions in trade?  Currently, Chinese military drills are disrupting trade flows through a crowded shipping lane, per the Financial Times.  In retaliation for Pelosi’s visit, China has banned thousands of Taiwanese food imports, according to Nikkei Asia, and tightened enforcement of Taiwanese product labeling, reports Bloomberg.  The announcement of a major Chinese investment in North America was delayed, per Bloomberg. 

This week, President Biden will sign into law the CHIPS and Science Act, legislation that represents a new turn toward an industrial policy for the United States to boost US semiconductor production.  Nikkei Asia looks at the bill and how it may drive a choice between fabrication in the US and China.  Are production incentives coming online just as chip demand is waning?; The Economist considers, while Nikkei Asia casts doubt on the effectiveness of all of these industrial policy efforts.  Which countries would make the best US partners in developing resilient semiconductor supply chains, the Center for Strategic and International Studies examines.  China continues to pursue its efforts to subsidize semiconductor production, reports Nikkei Asia, and may have achieved a technological leap recently, per Max Cherney at Protocol, who also reports on a new US effort to block China’s access to key design software. 

Mentioned Publications 

  1. How rising tensions across the Taiwan Strait could threaten global trade – William Langley, Chan Ho-him, and Thomas Hale, Financial Times, 5 August 2022
    China’s military drills are playing out in one of the most heavily trafficked shipping lanes in the world.
  2. China bans thousands of Taiwan food imports as Pelosi trip riles – Cissy Zhou and Thompson Chau, Nikkei Asia, 2 August 2022
    In retaliation to Speaker Pelosi’s visit, China has banned thousands of Taiwanese food imports.
  3. China Is Moving to Tighten Label Rules on Goods From Taiwan – Debby Wu and Danny Lee, Bloomberg, 5 August 2022 
    China is ramping up enforcement of existing rules on how Taiwanese products are labeled. 
  4. Pelosi’s Taiwan Trip Spurs Chinese Battery Giant to Pause Plant Debut – Eric Martin, Edward Ludlow, and Gabrielle Coppola, Bloomberg, 3 August 2022
    The announcement of a major Chinese investment is suspended because of political tensions. 
  5. The CHIPS and Science Act of 2022 – H.R. 4346, 29 July 2022 
    The CHIPS+ legislation was passed by the US Congress.
  6. CHIPS Act leaves chipmakers facing a choice between U.S. and China – Cheng Ting-Fang, Lauly Li, and Yifan Yu, Nikkei Asia, 2 August 2022 
    The US Congress passes legislation providing over $52 billion in subsidies for semiconductor manufacturers, to shift chip markets away from China. 
  7. After a turbocharged boom, are chipmakers in for a supersize bust?The Economist, 10 July 2022
    Are US subsidies becoming available just as supply begins to boom and global demand is weakening? 
  8. The resilience myth: Fatal flaws in the push to secure chip supply chains – Cheng Ting-Fang and Lauly Li, Nikkei Asia, 27 July 2022 
    Will efforts to subsidize semiconductor production prove fruitful? 
  9. Securing Semiconductor Supply Chains – William Reinsch, Emily Benson, and Aidan Arasasingham, Center for Strategic and International Studies, August 2022
    Which countries would be the best candidates for friend-shoring US semiconductor supply chains?
  10. 'Made in China 2025' thrives with subsidies for tech, EV makers – Kenji Kawase, Nikkei Asia, 22 July 2022 
    Subsidies continue even as the “Made in China” moniker disappears. 
  11. Experts raise eyebrows at claims China has successfully deployed advanced chipmaking technology at scale – Max A. Cherney, Protocol, 24 July 2022 
    Has China successfully advanced its chip manufacturing capabilities by two generations?
  12. The US is ready to block China’s access to advanced chip design software – Max A. Cherney, Protocol, 2 August 2022
    The US may implement new export restrictions on software used to design next-generation chips. 

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Does protectionism inhibit economic growth? 

As China counters trade challenges abroad, the Economist examines how local protectionism continues to pose problems for growth and development.  The US International Trade Commission releases part two of its investigation into the effects of censorship on trade and US business, with a particular focus on China. Writing in the East Asia Forum, Peter Drysdale and Charlie Barnes discuss how India can cut protectionism to realize its great power ambitions. 

Mentioned Publications 

  1. The trade war within ChinaThe Economist, 21 July 2022
    Local protectionism within China hampers efforts at economic development. 
  2. Censorship-related measures in China cause significant annual revenue losses for certain U.S. industries, reports USITCUS International Trade Commission, 7 July 2022 
    Part two of this Senate-initiated investigation finds significant losses to US companies from censorship in China and other key markets. 
  3. How India can realize its ambitions to become a great power – Peter Drysdale and Charlie Barnes, East Asia Forum, 7 August 2022 
    India wants to be a great power, but what does it need to do to accomplish its goals?  

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Yes, sanctions on Russia are working 

Writing in Foreign Policy, authors Jeffrey Sonnenfeld and Steven Tian explains why the Russian economy is implodingChina’s Belt and Road investments in Russia have fallen to zero for the first time reports Financial Times.  

Mentioned Publications 

  1. Actually, the Russian Economy Is Imploding – Jeffrey Sonnenfeld and Steven Tian, Foreign Policy, 22 July 2022
    The authors debunk nine myths about the impact of sanctions on Russia’s economy.
  2. China’s Belt and Road spending in Russia drops to zero – Edward White, Financial Times, 24 July 2022 
    China’s BRI investments in Russia have fallen to zero for the first time, signaling concerns over sanctions. 

Trade research resources 

Want to know the current tariff rates on your favorite imports?  Look no further than World Tariff Profiles 2022, from the WTO, UNCTAD, and the International Trade Centre. 

Mentioned Publications 

  1. World Tariff Profiles 2022 – The World Trade Organization, the International Trade Centre, and the United Nations Conference on Trade and Development, July 2022
    A comprehensive resource on the tariff and non-tariff measures of over 170 countries and customs territories. 

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