The explosive trade war between China and the US persists due to the constant imposition of tariffs by either side. The solution lies in the appreciation of the Yuan against the US dollar and liberalising restrictions on US foreign direct investment (FDI) in China.

President Trump’s decision to levy additional tariffs on $US300 of Chinese imports to the United States in response to China’s move to impose new tariffs on US imports is the latest volley in the escalating trade war between the world’s two superpowers.  

Despite ongoing bilateral trade negotiations, restarted after the Trump-Xi meeting at the Osaka G20 summit in June, there appears to be no end in sight to the impasse. This is not only affecting economic prospects for China and the US, but the entire world economy.  

So far, reciprocal tariffs have hurt China more than the US given China exports more to the US than the US does to China, with the International Monetary Fund (IMF) estimating that trade contraction could shave 1.6 percent off China’s growth over a two year period. 

Please click here to read the full “Policy options for addressing the China-US trade imbalance” article published at Australian Outlook, written by Griffith Asia Institute member, Professor Tony Makin.