Stephen Olson

Opinion | US-China war of words over the coronavirus crisis may well reignite the trade war

As the White House moves to systematically reduce US trade dependencies on China, the pandemic is putting pressure on the implementation of the terms of the phase one deal even before the difficult phase two negotiations begin. The uneasy US-China truce is unlikely to last long

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Stephen Olson

Published: 3:00am, 8 Apr 2020Updated: 4:48am, 8 Apr 2020

The coronavirus pandemic is reshaping the way the world lives, works and trades. The US-China trade relationship in particular is being disrupted in three distinct but closely intertwined ways: one, trade dependencies are being rethought; two, prospects for re-escalation of trade tensions are mounting; and three, mutual trust is deteriorating.

Long before any of us heard the word “coronavirus”, a series of gradually escalating tariff rounds between the US and China beginning in 2018 created significant disruptions in what was then a roughly US$635 billion trade relationship.

Business executives were forced to rethink and in some cases reconfigure supply chains to avoid both the cost of the tariffs and the uncertainty created by the ever-present threat of additional tariffs. Intermediary and finished products, which had been sourced from China, began to increasingly enter the US from Vietnam, Mexico and elsewhere.

Many of the Trump administration trade officials who authored the US’ more confrontational approach to China did so out of a core belief that deep economic integration between the two countries was a strategic mistake which had worked to the advantage of China and to the detriment of the US.

The implicit (and in some cases explicit) rationale behind many of the US’ trade actions was to shift supply chains out of China – if not back to the US, then at least closer to home.