In a surprising twist, the United States and China have decided to cool down their heated trade battle, agreeing to cut tariffs for the next three months. This move comes after months of back-and-forth in which both countries slapped hefty taxes on each other’s goods, causing worry about empty shop shelves and rising prices. According to a report from the Times, the US will now lower its tariffs on Chinese products to 30 per cent, while China will reduce tariffs on American goods to 10 per cent.

The trade war kicked off when US President Donald Trump ramped up tariffs on Chinese imports to a staggering 145 per cent. China hit back hard, imposing 125 per cent duties on American products. This tit-for-tat escalation had everyone on edge, especially American farmers who rely on China to buy their corn and soybeans, and shop owners who feared they wouldn’t have enough stock to sell. The Times noted warnings that if the trade war didn’t ease up, American stores could face empty shelves, which would’ve been a nightmare for shoppers.

The announcement of the tariff cuts came after intense talks in Geneva, where US Treasury Secretary Scott Bessent met with Chinese Vice-Premier He Lifeng. Bessent described the discussions as making “substantial progress,” while He Lifeng called it an “important first step”. China’s Vice Commerce Minister, Li Chenggang, was equally optimistic, telling Bloomberg, “This will be good news for the world. As we say back in China, ‘If the dishes are delicious, the timing doesn’t matter.’” This suggests both sides are hopeful that this deal could pave the way for better relations.

The news sent ripples through global markets. The pound took a bit of a hit as the US dollar strengthened against other currencies, according to the Times. Investors seemed to breathe a sigh of relief, moving away from safe bets like gold, which dropped 2.8 per cent to $3,234.65 per troy ounce. Earlier this year, when the so-called “liberation day” tariffs were announced in April, gold had soared to a record high above $3,400 per troy ounce, as reported by Reuters. Stock markets, on the other hand, were buzzing with excitement. London’s FTSE 100 climbed 0.6 per cent, Germany’s market jumped 1.5 per cent, and France’s rose 1.3 per cent. In Asia, Hong Kong’s Hang Seng surged 3.4 per cent, and China’s SSE Composite gained 0.8 per cent, the Times reported.

President Trump, never one to shy away from sharing his thoughts, took to his social media platform, Truth Social, to call the talks a step toward a “total reset” in US-China relations. He described the negotiations as “friendly, but constructive,” and stressed the importance of opening up China to American businesses, saying, “We want to see, for the good of both China and the US, an opening up of China to American business,” as quoted by the Times. This isn’t the first time Trump has tried to strike a deal with China. Back in January 2020, he signed a trade agreement, but later accused China of not sticking to it and claimed his successor, Joe Biden, failed to enforce it, according to CNN. This led to Trump imposing a blanket 10 per cent tariff on all Chinese goods in February, prompting China to retaliate with tariffs on American agricultural products.

The Geneva talks marked the first face-to-face meeting between senior officials from the world’s two biggest economies since Trump introduced steep new tariffs last month, sparking a fierce response from Beijing. The escalating measures had American farmers and retailers on tenterhooks. Farmers, in particular, were worried about losing China as a major market for their crops, while retailers feared supply shortages. On NBC’s Meet the Press, Trump brushed off concerns about empty shelves, saying he didn’t think an 11-year-old girl “needs to have 30 dolls … I think they can have three dolls or four dolls because what we were doing with China was just unbelievable. We had a trade deficit of hundreds of billions of dollars with China,” as reported by the Times.

From Geneva, US Trade Representative Jamieson Greer explained the reasoning behind the tariffs, pointing to the massive $1.2 trillion trade deficit with China. “The president declared a national emergency and imposed tariffs,” Greer said in a statement quoted by the Times. “We’re confident that the deal we struck with our Chinese partners will help us to work toward resolving that national emergency.” This trade deficit has been a sore point for the US, with the Economic Policy Institute noting that it reflects an imbalance where the US imports far more from China than it exports, affecting jobs and industries.

The tariff cuts are a temporary measure, set to last 90 days, giving both sides a chance to keep talking and hopefully avoid another round of trade chaos. For now, the deal has brought a sense of calm to markets and businesses, but there’s still a long road ahead to sort out the deeper issues. The BBC reported that trade tensions between the US and China have been simmering for years, driven by concerns over fair trade practices, technology transfers, and market access. This latest agreement might not solve everything, but it’s a step toward easing the strain felt by farmers, shop owners, and consumers on both sides of the Pacific.

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Clean energy technology – particularly the so-called new three of solar power, batteries and electric vehicles – emerged as an important source of growth in China’s exports in 2023. Thanks to booming markets at home and abroad, clean energy has become a key driver of economic growth.

A lot of media and policymaker attention is focused on possible US and European tariffs on China’s cleantech exports, with the perception that these could be a major blow to the industry.

What is missing from this picture is that half of all China’s exports of solar and wind power equipment and electric vehicles (EVs) now go to the Global South, according to UN Comtrade data. Emerging and developing countries have driven most of the recent growth in export volumes.

In 2024, the value of EV exports from China to the Global South overtook those to the EU, with China’s exports to developed markets falling and those to developing markets posting strong growth.

As we will see, Global South countries collectively have been the largest importer of solar and wind power equipment from China since at least 2015, but the gap widened in 2023 when the volume of these solar imports from China grew 70% year-on-year.

The US is a niche market for China’s cleantech

Solar and other clean energy have gone global in the past decade. Between 2010 and 2015, 70% of solar and 50% of global wind installation occurred in developed economies. By 2023, these shares had fallen to just over 20%.

The US now represents only 7% of the global market for newly installed solar power plants, and even the European Union and the US combined make up less than 20%.

The US has imposed tariffs on imports from China for a long time and, as a result, most of its supply already comes from other producers. Only 4% of China’s total exports of solar power and wind power equipment and EVs go to the US, compared with 15% of China’s overall exports.

This means that China’s cleantech exports are much less reliant on the US in particular and Western markets in general than its export industries overall. In a market where sales volumes are growing at 30% this year, the US is a footnote.

While the majority of solar, wind and EV exports already go to the Global South, the US and the EU remain the dominant importers of batteries. These are intermediate inputs into vehicle production and other manufacturing. Targeting them with high tariffs would hurt local manufacturing.

Cleantech exports to the Global South are booming

The falling reliance on developed markets comes down to China’s cleantech manufacturing boom having catalysed rapid deployment of solar, wind and EVs in the Global South. Around 47% of China’s exports of these products went to the Global South in 2024, a record-high share and close to matching exports to developed countries for the first time.

From 2021 to 2024, emerging and developing markets drove 70% of the growth in China’s exports of solar, wind and EVs, with seven of the ten top growth markets located in the Global South.

Examples include solar power booms in South Africa and Pakistan and strong growth in, for example, Brazil and Thailand. The five largest importers of wind power technology from China are all developing countries – South Africa, Egypt, Chile, Brazil and Uzbekistan – as are the five largest growth markets for solar: Saudi Arabia, Pakistan, Uzbekistan, Indonesia and India. Two Global South countries also feature on the list of the five largest importers of EVs – Brazil and Thailand.

This trend is expected to continue. Emerging and developing countries are expected to have a market share of 70% in solar PV and 60% in wind and in battery storage during this decade out to 2030, according to the International Energy Agency’s World Energy Outlook.

The US and other developed country markets are more significant in electric vehicles, due to high private car ownership. Yet, in the IPCC 1.5 and 2C pathways, the share of the US and the EU in global investment in electrified transportation falls from almost 50% in 2022 to 36% by 2035, with two-thirds of the market growth coming from outside these two regions. If Donald Trump’s policies slow down the electrification of the transport sector in the US, the significance of these markets will diminish further.

China’s increasing efforts to increase clean energy lending and co-operation will also stimulate demand from the Global South. Examples of this include recently announced new green energy deals with Indonesia, increased financing of renewable energy projects such as in Africa and Central Asia, and increasing share of renewable energy in projects under the Belt and Road Initiative.

Decoupling efforts will have a limited impact on China’s cleantech industry

China’s dominance in clean energy manufacturing has caused some major economies to try to diversify or decouple their supply chains from it. The US and India have clearly committed to slashing their dependence on China. Even those two markets have a very long way to go to meet their own demand without relying on the East Asian nation.

For example, the solar equipment production capacity in the world outside of China is barely sufficient to cater to the US market, meaning there is little possibility for other buyers to switch to non-Chinese supply. India is adding a significant amount of production capacity for solar cells and panels, but capacity additions in the key upstream input, polysilicon, are much more modest.

It’s entirely possible for the US and India to build their own supply chains for solar. Yet the impact on China’s cleantech industry will be limited, as the two countries’ strategy for doing this relies on high tariffs to shelter domestic production. This means that their producers won’t be able to compete overseas, surrendering this market to China.

While the US and India already have policies in place, the EU is torn between conflicting impulses. The bloc needs clean energy technology to meet climate targets, reduce reliance on imported fossil fuels and bring down energy prices. The EU is concerned about reliance on China but lacks the industrial policy framework to address the issue, and will find it hard to match the US on spending. The bankruptcy of Swedish battery maker Northvolt, dubbed “Europe’s best shot at a homegrown electric-vehicle battery champion”, made this evident. The industrial and supply-chain policies needed to reduce the EU’s reliance on cleantech imports from China could yet emerge, but the bloc can hardly afford to slow down clean energy deployment during the long period that such policies would take to yield results.

As other major economies pursue diversification, Beijing should have little to complain about. It has largely ringfenced its own domestic cleantech market – by far the largest in the world – to exclude imported products. How this has been done matters. Tariffs raise the cost of the targeted technologies and therefore have the potential to slow down the energy transition. While China has used trade barriers, the main thrust has been supporting and subsidising domestic supply of cleantech, in the process driving down prices and speeding up adoption not just in China but globally.

China has a strong self-interest in the global energy transition

Given the minor significance of the US market for China’s clean energy industry, the only real risk from the Trump administration to the industry would be if he succeeds in slowing down global climate action. This seems unlikely, as clean energy adoption is driven by economics more than altruistic global goals.

Given the important role that clean energy technology plays in the country’s economy and exports, China has a strong interest in making sure the global energy transition keeps accelerating. That will be seen in bilateral lending and diplomacy, and could also lead the country to take more forward-leaning positions in multilateral climate negotiations.

This article was originally published by Dialogue Earth with the title Why China’s clean energy need not fear US tariffs

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Although Trump’s re-election will be felt globally, few countries are likely to be affected quite like China. Trump is a champion of isolationism and the architect of the US-China Trade War and sweeping tariffs on Chinese goods. China was a focal point in his recent campaign, where he pledged a blanket 60% tariff on Chinese imports. Yet Trump is known to embellish, and his promised iron-fist approach to China may not unfold exactly as people expect.

To start, a 60% tariff would not bode well for the middle Americans who voted for him, hoping for a return to the pre-outsourcing-to-China days – not during his presidential term, anyway. During the last tariff hike, businesses quickly realised how complex, fragmented, and China-dependent supply chains had become.

Reshoring manufacturing from China to the US is not straightforward. Most manufactured goods require numerous components, many of which are made in China and thus still exposed to these tariffs. This became evident with the last set of tariffs. Given the reliance on China for so many goods and components, the biggest impact of new tariffs would be higher prices and inflation in the US – one of the main pain points for the Biden administration and a primary driver of change.

In the longer term, some businesses may look to diversify to other manufacturing locations. However, the challenges of shifting supply chains out of China, coupled with China’s unique advantages as a manufacturing powerhouse, mean that China is likely to remain the world’s factory during Trump’s second term and beyond.

Despite gloomy predictions after Trump’s first round of tariffs, China’s global share of exports has risen by 1.5% since before Trump’s first presidency – over three times the growth rate of the next highest region, Latin America, according to the IMF.

Another card China holds in its relationship with a Trump-led America is Elon Musk. Musk has donated more than $118 million to support Trump’s 2024 campaign, heavily supported him on X, and has been named government efficiency tsar, even accompanying Trump on his post-election call with Ukrainian President Zelensky. While Musk can be as unpredictable as Trump, he has significant exposure to China, with over half of all Teslas manufactured at its Shanghai factory. Musk has often expressed respect for the Chinese people and their innovations, and has supported some of their policy directions that are unpopular in the West. Trump also has close ties with Apple, Blackstone and other companies with significant interests in China.

Regardless of how much inflationary concerns, the role of Elon Musk or other business interests temper Trump’s policies toward China, Beijing is likely to double down on efforts to reduce its reliance on US exports. We can expect to see a stronger focus on driving domestic consumption in China, aiming to increase its contribution beyond the 49.9% of GDP growth seen in the first three quarters of this year – a promising sign for brands targeting Chinese consumers.

While a Trump-led America may fuel nationalism in China, Beijing could take a similar approach to Trump’s last presidency. If Trump once again adopts an “America-First” isolationist stance, Xi might reiterate to the global community that China is open and welcoming, not isolating. Encouraging Russia to end its war could be a strategic move to regain some favour with Europe.

With Beijing supporting an open world, countries like the UK, Australia, New Zealand, Europe, and potentially Canada may benefit from positive brand exposure, along with an influx of students and tourists who would have traditionally chosen the US, reaping the associated halo effect.

China won’t be without challenges under a Trump presidency – neither will the rest of the world. Geopolitical tensions will persist, yet it may not spell the doomsday for China that some predict.

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At the time of writing, the final result of the US election remains in the balance. The future of US-China relations will be a top foreign policy priority for whoever emerges victorious.

Biden Win

In the event of the most likely outcome: a victory for Democratic candidate Joe Biden.

Broad policy

• McGregor expects Biden’s approach to foreign policy to be much more multilateral, going back to the norms of foreign policy.
• Biden has a ‘Buy American’ policy that appears in part to be a response to Beijing’s ‘Made in China 2025’ effort, with a plan to put $400 billion towards US government procurement of US products, and to invest $300 billion in technologies such as quantum computation, 5G, and artificial intelligence.
• A Biden administration will impose a 10% surtax on American corporations that move offshore to sell products back to the US. “It is interesting that this doesn’t go after US companies that are in China to sell to the China market.”
• On tariffs: Biden has been negative about them, but McGregor says: “I don’t see him giving them up any time soon.” Many in Congress understand that tariffs are paid by US consumers and businesses, so there could be a reckoning: “But they also serve as real leverage with China, and you don’t want to drop your leverage.”
  Jim expects Biden’s policy to be “much more focused on human rights than the Trump administration has been.” This will inform policy towards Hong Kong, although the administration will also not want to “punish the Hong Kong people” with excessive sanctions.

Biden-Xi relations

• Biden spent a lot of time with Xi Jinping when he was vice president under Barack Obama; given anti-China sentiment in the US, “he has had to be defensive about that in the campaign.”
• Still, in the past, Biden has talked about the importance of the US-China relationship and the fact that the two countries have to get along.
• Biden has probably spent more time with Xi than any other US official having travelled with him both in the US and China.
• But he will want a “real dialogue” with Xi: “They’re not going to listen to a lot of nonsense.”
• China is going to have to climb down on its wolf warrior strategy in order to engage.
• There is one bilateral issue in Washington on which all agree and that is that China is a bad guy. “You say something nice about China in Washington these days, and you’ll be called a traitor. It’s really got that dark.”
• The US attitude is that many feel betrayed by China. There is a strong feeling that the US opened up its universities, markets and so to China, but that this goodwill has not been reciprocated. “This is the strong American attitude, and I understand that.”
• There is a strong feeling in Congress that the US needs to be tougher in enforcing international rules on China when it goes beyond its borders, with less emphasis on “sitting round a negotiating table trying to persuade China to change its model.”
• A big question for Chinese entrepreneurs now is whether they will be able to build big international companies, given the Communist Party’s moves to be more involved in private businesses and China’s ability to request data from them. “There’s this distrust of China Inc, and distrust of the Chinese government.”

Biden policy advisers

Influential people who are likely to shape US policy on China under Biden include:

• Tony Blinken – a former Deputy National Security Adviser. He has talked about the importance of reciprocity in US-China relations.
• Samantha Power – a possible Secretary of State. She has said that if you succumb to China’s bullying and intimidation, you can expect only one thing – more of the same. Like many former Obama administration people, she is now taking a harder line on China.
• Lael Brainard – possible Treasury Secretary. She has said China’s economy is now too large for it to pick and choose which rules it will follow.
• Ely Ratner – a key advisor who has said the China challenge is more about the US and its competitiveness.

A return to multilateralism?

• Biden may push for a revival of the Iran nuclear deal, and for the US to re-enter the Paris climate deal.
• He will “stop the destruction” of the WTO, but will push for reform to make it less easy for China to play rivals off against each other. “We do need a strong multilateral trade organisation, and China needs it as much as anyone.”
• Biden has also talked about forming a group of democracies partly in an effort to withstand China. There will be a “lot less worry” in Washington that this might offend China.
• Under Biden, the US may look to rejoin the CPTPP, but it may be hard to get back in. Withdrawing from the deal may have been the “dumbest thing the US has done since invading Iraq. It was so upsetting to those countries, they’re going to extract a big price to let us back in – and they should.”
• Biden is likely to be careful in his approach towards Taiwan. There is a lot of support in the US Congress for the US to pursue a free trade agreement with Taiwan, while Biden may support its entry into bodies such as WHO.

US Business Community

• McGregor was among those who helped to push for China’s entry into the WTO. “But China changed, first under Hu and Wen in their latter years, and then under Xi Jinping.”
• McGregor believes China is now going through a period of ‘reform and closing’, in contrast to the post-1978 ‘reform and opening up’ period. Beijing is focusing on reforming its own companies, but closing up to foreign companies that it can replace.
• US multinationals do still “need to be in China: If they are not in China they are going to lose out globally – you’ve got to be a player in China. You can’t not be there.” Most US companies are in China for the China market, and those companies are doubling down.
• Under Beijing’s new ‘dual circulation’ strategy, China may give more opportunities to companies in the tech and retail sectors.
• But companies have to go in with both eyes open. China “will welcome you – but it’s not their goal to have you there for the long term. To quote Mao Zedong, China will ‘Use the past to serve the present, let foreigners serve China.’”
• US business wants to be allowed to carry on operating in China, “but they also are going to have to show they care about the United States and are investing in the US at the same time.”
• Doing business in China “used to be like all-star wrestling. You got bounced around, but never really got hurt bad with no lasting damage. Now it’s like UFC – where it’s much more brutal and you can get hurt bad.”
• Jim’s advice: “You’ve got to really pay attention to policy – that’ll help you get through the minefield and you might even find opportunities.”

Trump Win

• A second Trump term may see a somewhat softer approach towards China.
• Trump will be focused on building back the US economy for a second time. If he’s going to do that, he’s going to need China. US companies have to be in China, and have to have good market share there.
• Trump “won’t need China any more to beat up.” He’ll start being nice to Xi Jinping again, start buttering him up.
• China hawks such as Secretary of State Mike Pompeo, or US trade representative Robert Lighthizer may drop out of the administration or be more marginalised in a second term. Matt Pottinger, who has been responsible for much of Trump’s approach towards China, has already said he will leave the administration.

Advice for the UK and UK business

• McGregor urges the UK not to return to the ‘golden era’ of UK-China relations: “China doesn’t respect anyone who sucks up,” he said.
• Post-Brexit Britain may be seen as “ripe hanging fruit among Western democracies” by China, but we should not let ourselves be intimidated. “You’ve got to be careful about putting yourself in a subservient position to China.”
• Britain has a strong reputation in areas such as tech, science and finance, and we should emphasise those qualities in doing business in China, while realising that “China’s goal is to learn what you do and then do it themselves.”
• Business should learn a lesson form Xi, who is preparing China for long term hostility from the outside world.
• “You’ve got to try to make yourself sanction-proof. But you have to look at the cost – are you making enough money in China to cover the cost of sanctions preparation?”

For more information on China policy contact torsten.weller@cbbc.org

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Xi’s speech to a large extent echoed his famous speech at Davos in 2017. Once again, he sought to portray China as a leading proponent of globalisation and anti-protectionism – passing over growing international concern about the recent statist trajectory of the Chinese economy. In addition, the Chinese leader made some eye-catching climate change-related pledges, setting a target for China to be carbon-neutral by 2060.

Trump, meanwhile, used his time to present a now-familiar litany of grievances towards China, chief among them its response to Covid-19; and he warned countries that they should take care of their own interests first, once more eschewing the US’s traditional role as the world’s leading force for global cooperation.

The following newsletter summarises the main points of the leaders’ speeches, with links to both at the end.

Xi defends globalisation and promises more aid to developing countries

Fight against Covid-19

Xi began his speech by highlighting the colossal challenges posed by the recent Covid-19 pandemic. He called for a multilateral effort to strengthen the leading role of the World Health Organisation and for better coordination of macroeconomic policies to help countries reopen their economies.

Furthermore, he called for the international community to address pressing issues such as debt relief, and the implementation of the 2030 Agenda for Sustainable Development in developing countries.

Regarding the fight against Covid-19, Xi repeated China’s commitment to contribute US$2 billion (£1.6 billion) of international assistance over the next year and promised that any vaccine developed by China would be made available to all countries.

Fight against protectionism

Xi spoke in defence of globalisation, rejecting what he called zero-sum thinking and protectionist tendencies. In a thinly veiled criticism of the Trump administration, the Chinese leader said that “we should see each other as members of the same big family, pursue win-win cooperation, rise above ideological disputes, and not fall into the trap of ‘clash of civilisations’”.

Xi argued that globalisation is irreversible and that no country could thrive in isolation. He affirmed the central role of the World Trade Organisation and its multilateral trading regime. Yet Xi also acknowledged that the global governance system needs reform to deal with modern challenges such as Covid-19, and he promised to work with other nations to make the UN fit for the 21st century.

Fight against climate change

In the most headline-grabbing section of his address, Xi announced that China would step up its contribution to the global fight against climate change. Specifically, Xi said that China would aim to reverse its increase of CO2 emissions before 2030, and to achieve carbon neutrality before 2060.

Xi also confirmed the targets outlined in the Paris Climate Agreement and called for a ‘green revolution’ and ‘green economic recovery’ from the pandemic.

China promises more development aid

Xi ended by announcing several concrete measures to support UN efforts to help developing countries in the current situation, including a pledge to contribute an additional US$50 million (£39 million) to the UN Covid-19 Global Humanitarian Response Plan.

Trump praises himself and blames China for Covid-19

While Xi called for a multilateral effort to deal with the Covid-19 crisis, Donald Trump did the opposite.

Trump explicitly blamed China for the spread of Covid-19, which he again called the ‘China virus’. He called upon the world to hold China and the World Health Organisation – which according to Trump is under China’s control – accountable for the damage caused by the pandemic.

In a speech marked by his signature hyperbole, Trump – who is of course currently heavily in campaign mode – spent more time praising his own achievements than addressing his global audience.

While Xi promised US$2 billion to support countries in the fight against Covid-19, Trump highlighted the US$2.5 trillion in U.S. military spending undertaken by his administration, and its purported achievements in the Middle East and Afghanistan.

Whereas Xi addressed global poverty and climate change, Trump talked about terrorism, drug trafficking and the repression of women and religious minorities. Where Xi stressed China’s role as a promoter of global and sustainable development, Trump styled the United States as the world’s foremost champion of human rights. And whereas Xi finished his speech with specific proposals to support UN programmes, Trump concluded that each country should do what America has done under his leadership and look out for itself, in the following terms:

“For decades, the same tired voices proposed the same failed solutions, pursuing global ambitions at the expense of their own people. But only when you take care of your own citizens will you find a true basis for cooperation. As President, I have rejected the failed approaches of the past, and I am proudly putting America first, just as you should be putting your countries first. That’s okay — that’s what you should be doing.”

References

Full Speech of Xi Jinping

Full Speech of Donald Trump

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An unforeseen consequence of the ongoing trade war between China and the USA is a potential rise in pollution in China this winter. As China’s policy makers aim to boost China’s economic performance following an economic downturn blamed on the trade war, they have said “bye bye” to pollution control as they dial up the output of factories to ten.

Previous plans to curb steel production and coal use in a bid to reduce air pollution, which worsens in winter months, have been scrapped. China’s northern cities rely heavily on coal-fired power and last year steel producers in four major cities were forced to half their output during winter months and reduce their coking coal by a third. Another 28 cities were also forced to cut steel and aluminium output.

This winter, guidelines have indicated less stringent caps and levels of PM2.5 particulate matter must be cut by only three rather than five percent. The easing may have been prompted by a public outcry, claimed the Financial Times. “Winter curbs on coal, including on heaters used by many residents in smaller cities and villages, left millions freezing as local governments scrambled to provide gas heating.  By imposing emissions targets rather than specific production cuts, China shifted responsibility to local rather than central officials which could also weaken enforcement,” it wrote.

They have said “bye bye” to pollution control as they dial up the output of factories to ten

Elsewhere, a huge deal agreed to provide China with affordable, clean, Liquefied Natural Gas (LNG) looks to be on the rocks. China agreed to invest $43 billion into a LNG project in Alaska during Trump’s visit to China last year. Since 2016, the US has seen a boom in shale gas, leading to an abundance of LNG. This glut of cheap LNG would help wean China off dirty coal and was seen as a win-win but the growing trade war has led to China imposing a 10 percent tariff on $60 billion of goods, including LNG.

China is the second-largest buyer of LNG globally but has dialled back its purchases from the US, turning instead towards Qatar, Australia and Russia. An unfortunate consequence is that China will continue to rely more on coal than it had planned.

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Friction between the world’s two largest economies continues after Vice President Mike Pence accused China of meddling in the upcoming US Mid Terms. Russian interference in US elections “pales in comparison” with Chinese meddling, he claimed, following similar accusations by US President Donald Trump earlier in the summer.

No evidence was given for the accusation and cybersecurity experts contradicted the claims. Even the administration’s own secretary of homeland security, Kirstjen Nielsen, said: “We currently have no indication that a foreign adversary intends to disrupt our election infrastructure.”

The US doubled down when Secretary of State Mike Pompeo said that China and the US are in “fundamental disagreement,” during a tense visit to Beijing last month. Standing next to Pompeo, Chinese foreign minister Wang Yi said that “a direct attack on our mutual trust has cast a shadow on US-China relations.”

Security talks between the US and China planned for October were cancelled, with both sides blaming the other. This may have been due to the escalating trade war, the tense discussions over election tampering or perhaps the US Navy’s incursion into the South China Sea. The guided-missile destroyer USS Decatur sailed within 12 nautical miles of the Gaven and Johnson Reefs in the Spratly Islands as part of what the US Navy calls “freedom of navigation operations.”

It was later leaked that the US Navy was recommending the US Pacific Fleet conduct a series of operations during a single week in November as a major show of force to warn China. The exercise, it was reported, would involving US warships, combat aircraft and troops to demonstrate that the US can counter potential adversaries quickly on several fronts.

Meanwhile, Bloomberg claimed that China has inserted spy-chips in servers used by Amazon and Apple, allowing a back door to access computers and data – something Amazon, Apple and China have denied.

China needs to act globally if it wants to play globally

All in all, it’s been a tough couple of months for US-China relations. Accusations have been flying, both sides’ propaganda machines are working at full pelt and serious warning bells are ringing that suggest things could turn even nastier.

Trump has followed through on his tough stance on China that he promised during this election campaign. China, he says, has been stealing US jobs and unfair trade rules have led to the current US-China trade deficit. China has also been caught out, surprised that Trump has followed through on his threats of sanctions and tariffs, whilst gloating that the west’s democratic system has failed. Both sides need to work together to find a solution rather than continuing to spiral further and further apart.

Trump’s incessant desire to look to the past and to revive dying industries rather than promote new technologies, means that he is allowing China to leapfrog the US when it comes to new industries such as green-tech, fin-tech and AI. On the other hand, China positions itself as a paragon of free trade and globalisation, whilst restricting foreign competitors and subsidising domestic firms. It needs to act globally if it wants to play globally.

Trump thinks that trade is a zero-sum game. If one party is doing badly, it’s because the other is doing too well – trade is a war, which will be won or lost. This is not how trade works but China, who need to portray a strong image domestically and is not comfortable losing face on the world stage, is ready and willing to go head to head.

The repercussions of an escalated trade war are not inconsequential. All diplomacy is manifestly intertwined. Trade talks are held alongside discussions on other important subjects and sadly, urgent matters have been brushed to the side as trade dominates the time and energy of both the civil servants and the press. Human rights issues seem to have totally fallen off the agenda at a time when they are needed more than ever, and the environmental knock-on effects are becoming increasingly apparent. It is in the interest of not just the two countries involved but the world as a whole to start to find a compromise that will de-escalate the trade war before the two sides come to blows and the rest of the world is caught in the crossfire.

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