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Beyond tariffs: In the Trump era, a new trade war arsenal

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Last week, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin traveled to Beijing to discuss a potential resolution to the ongoing trade war between the United States and China.

With the Wall Street base case projecting tariff stabilization, various members of the business community, including those working within the manufacturing and agricultural sectors, are beginning to breathe a collective sigh of relief.

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Across both countries, there is hope that significant domestic economic pressures such as last week’s inversion of the American yield curve and the widespread impact of declining Chinese exports will push Trump and Chinese President Xi Jinping to reach an agreement as soon as possible and work towards gradually lifting any remaining tariffs.

Despite these encouraging developments, heralding in the sunset of the Sino-American trade war may yet be premature. The various hostile interactions between Washington and Beijing over the course of the last twelve months demonstrate a historic shift in modern trade war tactics that go beyond the presence—or lack thereof—of customary duties and excises.

If tariffs represent the ammunition of choice in traditional economic warfare, the actors of today’s conflict employ a much more complex array of weapons—including judicial targeting, pointed sanctions, encumbered bureaucratic processes—that create a dangerous slippage between economics and politics and imply the long-term destabilization of both capital markets and the postwar diplomatic order.

Most conspicuously in recent news cycles, both Beijing and Washington have openly endorsed the use of theoretically independent judicial proceedings as bargaining chips in economic negotiations.

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