US-China rift puts world economy on edge

A deepening trade war could further weaken ties between the superpowers. The effects will reverberate everywhere, write Daisuke Wakabayashi, Alexandra Stevenson and Patricia Cohen from Seoul, Hong Kong and London

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A dizzying escalation of tariffs has unravelled a trade relationship between the United States and China forged over decades, jeopardising the fate of two superpowers and threatening to drag down the world economy.

The brinkmanship displayed by the two countries has already far exceeded the battles they waged during President Trump's first term. In 2018 and 2019, Trump raised tariffs on China over 14 months. The latest escalation has played out mostly over a matter of days, with levies that are far greater and apply to a broader swath of goods.

On Wednesday, Trump countered China’s decision to match his 50% levy — a penalty for Beijing's countermeasure to an earlier US tariff — with an additional duty, raising the rate on Chinese imports to 125%.

As hard as Trump has pushed, China has refused to back down. China has elevated its tariffs on goods imported from America to 84%. It pledged again on Thursday to “fight to the end,’ an approach that is consistent with how Xi Jinping, the country's top leader, has sought to redefine the global order — one with Beijing, not Washington, at the centre.

“We are approaching a monumental train wreck breakup,’ said Orville Schell, the Arthur Ross director of the Center on US-China Relations at Asia Society in New York. “The fabric that we so carefully had woven together over the last several decades is ripping apart”.

At risk is a relationship that shaped the global economy in the 21st century. For years, both sides benefited. American companies’ extensive use of China's factories kept prices in check for American consumers and padded the profits of the country’s biggest companies. China got jobs and investment that lifted millions of Chinese families out of poverty. And as China's spending power grew, it opened up a giant and lucrative market for American brands.