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Definition of a trade war

A conflict where countries economically "attack" each other's trade using barriers such as tariffs.

Primary weapon of a trade war

Tariffs—taxes imposed by a government on goods and services imported from other countries.

Causes of the U.S.-China trade deficit

The U.S. economic structure (insufficient savings and abundant consumption), the global role of the U.S. dollar, and restrictions on U.S. exports to China.

Economic implications of trade deficits

Can lead to job outsourcing, reduced domestic manufacturing employment, and trade vulnerability.

Gains from trade and comparative advantage

Countries benefit from specializing in producing goods at a lower opportunity cost and trading for others, even if one country has an absolute advantage in everything.

U.S. accusation of exchange rate manipulation

The argument that China deliberately keeps its currency (RMB) undervalued to make Chinese exports cheaper and more competitive globally.

China's defense regarding exchange rate manipulation

China denies manipulation, arguing that the weak RMB is a market-driven outcome of buying safe U.S. Treasuries and that appreciation would not fix the U.S. trade deficit.

U.S. claims of WTO rule violations

The claim that China created an uneven playing field through state-owned enterprises (SOEs), subsidies, and market access barriers after joining the WTO in 2001.

Government subsidies and overcapacity

Chinese state-driven industrial expansion, especially in EVs and steel, creates production well above market demand, leading to the dumping of cheap goods abroad.

Coerced technology transfer

China's historical requirement for foreign firms to form joint ventures and share advanced know-how as a condition for market access.

Four mechanisms of coerced technology transfer

Joint ventures and investment restrictions; discriminatory licensing terms; state-directed foreign acquisitions; and commercial cyber intrusions.

Intellectual property right (IPR) theft in China

Widespread piracy, counterfeiting (e.g., fake Apple stores, Qiaodan/Jordan, New Barlun), and economic espionage that costs the U.S. economy billions annually.

China's first-to-file trademark law

A Chinese legal rule granting trademark rights to the first applicant rather than the historical global user, leading to major trademark disputes for foreign brands.

Are Chinese firms paying the U.S. tariffs?

No. Empirical studies (e.g., Amiti et al.) show that U.S. tariffs have been passed on almost entirely to U.S. importers, firms, and consumers through higher prices.

Winners in the trade war

Domestic producers of tariffed goods (import-competing industries) and political incumbents using protectionism as a political tool.

Losers in the trade war

Domestic consumers, downstream industries using imported raw materials (e.g., auto and agriculture), and exporting firms hit by foreign retaliatory tariffs.

Trade War 1.0 timeline (2018–2020)

Began in 2018 with U.S. tariffs on steel, aluminum, and waves of Chinese goods, culminating in the Phase One trade deal truce in January 2020.

Trade War 2.0 timeline (2025–2026)

Marked by renewed tariff escalations (fentanyl concerns and reciprocal tariffs), Supreme Court IEEPA rulings, Section 301 actions, and 2026 tariff truces and boards of trade.

Hostage diplomacy

The strategic detention of foreign nationals for political leverage, exemplified by the Huawei, Canada, and U.S. diplomatic standoff.

Huawei's strategic significance

A dominant global telecommunications and 5G company with alleged illicit ties to the PLA and CCP, raising severe U.S. national security concerns.

CHIPS and Science Act background and goals

A 2022 U.S. law providing billions in subsidies to restructure the semiconductor supply chain, revitalize domestic manufacturing (Intel and TSMC in Arizona), and counter China.

The chip ban and its effectiveness

U.S. export controls restricting China's access to advanced semiconductors and manufacturing equipment; effective at disrupting high-end technology but porous and costly to some domestic firms.

Weaponized interdependence (WI)

A framework showing how states centrally located in global economic networks can leverage their structural position to coerce others.

The chokepoint effect

The ability of a central actor in a network to restrict access, penalize targets, or disrupt flows for strategic coercion.

Cross-network weaponization

Using a dominant central position in one network (e.g., semiconductor design) to exert leverage and control chokepoints in another network (e.g., assembled chips).

Four networks of the semiconductor supply chain

Design; raw materials (silicon and hydrogen fluoride); production equipment; and assembled chips.

U.S. position in the semiconductor networks

Marginal in manufacturing and assembly, but overwhelmingly dominant and central in the design network through intellectual property and electronic design automation (EDA) software.

China's position in the semiconductor supply chain

Dominant in raw material extraction and downstream chip assembly and packaging, but highly dependent on foreign imports for advanced fabrication and design.

Foreign Direct Product Rule (FDPR)

A U.S. rule extending export controls to foreign-made products that rely on U.S. software or technology, effectively weaponizing design.

Japan-South Korea trade dispute (2019)

Japan restricted exports of key chemicals (hydrogen fluoride and photoresists) to South Korea; South Korea responded through import substitution and domestic production.

Structural power (Susan Strange)

The power to shape and determine global frameworks, divided into control over security, production, finance, and knowledge/information, where the U.S. excels in technology.