The trade war between the United States and China appears to be escalating. The US imposed an additional 25% tariff on US$34 billion of Chinese goods on July 6, and China retaliated with a similar tariff on US imports worth US$29.6 billion. The US may impose an additional 25% tariff on another US$16 billion of Chinese goods in September and perhaps a third new tariff of 10% on another US$200 billion in trade later this year. China’s reaction bears watching.

Both countries have also used other policy instruments in their trade fight. The US, for example, has used the CFIUS1 process to block Chinese acquisitions of certain US companies on national security concerns, while China has withheld regulatory approval of Chinese companies on global mergers that involve US companies.

There are no signs that either country will back down in the immediate future.

Downloads –