The New York Times reports:

A dizzying escalation of tariffs has unraveled a trade relationship between the United States and China forged over decades, jeopardizing 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, Mr. 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 broader swath of goods.

On Wednesday, Mr. Trump countered China’s decision to match his 50 percent levy — a penalty for Beijing’s countermeasure to an earlier U.S. tariff — with an additional duty, raising the rate on Chinese imports to at least 145 percent.

As hard as Mr. Trump has pushed, China has refused to back down. China has elevated its tariffs on goods imported from America to 84 percent. 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 center.

“We are approaching a monumental train wreck breakup,” said Orville Schell, the Arthur Ross director of the Center on U.S.-China Relations at Asia Society in New York. He added, “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.

That arrangement has been tested by China’s emergence as a global power, and a growing U.S. concern that it had become vulnerable to pressure by China over access to components and materials crucial to advanced technology and manufacturing.

It is not clear who will blink first, or if the two sides can find common ground. One thing is certain: The looming disruption to the flow of billions of dollars’ worth of goods between China and the United States, as well as the trade that often passes through other countries, will have a devastating impact on both economies and their trading partners.

“You can’t model this,” said Steven Okun, chief executive of APAC Advisors, a geopolitical consulting firm. “Are countries going to have to choose between the U.S. and China?”

Economists are predicting that the divide could drive the U.S. economy into recession. At the same time, the Chinese economy is facing the prospect of a painful divorce from its biggest trading partner, which buys more than $400 billion worth of goods each year, as the country is reeling from a property market collapse and sluggish consumer confidence.

Since the United States and China are central to the global economy, the impact will reverberate everywhere. [Continue reading…]