Tension between the US and China increases

Leaders at the annual summit of the Asia-Pacific Economic Cooperation (APEC) in Papua New Guinea (PNG) failed to agree on a communique for the first time in its history last weekend.

The inability of the APEC leaders to reach a consensus reflects deep divisions between the United States and China.

“You know the two big giants in the room,” Papua New Guinea Prime Minister Peter O’Neill said at a closing news conference, when asked which of the 21 members of the APEC group could not agree.

During the summit, the US and China had a dispute over which is the better investment partner when it comes to trade and security in the region.

Chinese President Xi Jinping dwelled on the economic structure of the world by suggesting free trade. 

His stance against protectionism was seen as a veiled comment targeting the Trump policies that have led to the recent trade wars.

Xi said: "History has shown that confrontation, whether in the form of a cold war, a hot war or a trade war, will produce no winners."

The Chinese leader did not mention his country’s militarisation in the South China Sea or its repressive policies against Muslim Uyghurs.

American Vice President Mike Pence stated that the US won’t change its stance against Chinese economic policy.

According to the US, the “fair trade”, suggested by China, is a tool with which to exploit the small Pacific countries and make them economically dependent on China.

Xi made a push to expand China’s influence in the Pacific on Friday, holding a forum with the leaders of eight small island countries at the Papua New Guinea (PNG) conference.

The Chinese president arrived to great fanfare on Thursday and was feted by PNG officials. He stoked Western concern on Friday when he met Pacific island leaders to pitch his Belt and Road initiative. 

The United States and its allies, Japan, Australia and New Zealand, countered on Sunday with a $1.7 billion plan to deliver reliable electricity and the internet to PNG.

Pence also announced that the US and Australia would build a naval base on Papua New Guinea’s Manus Island. 

“We will work with these nations to protect the sovereignty and maritime rights of Pacific islands as well,” Pence said.

Adding to the electricity plan for PNG, the US involvement in the building of a naval base in Manus Island shows that the confrontation between China and the US is extending from economy to security in the Pacific region.

History of the US-China trade war 

China has been on Trump's radar since before his inauguration.

From the theft of American technological know-how to interventionist policies, Trump has not held back in his criticism of his country’s top trade partner or in doling out punishment.

The US slapped a 25% tariff on $34 billion of Chinese goods in early July. Another round of duties on $16 billion-worth of goods went into effect on August 23, bringing the total amount facing a 25% charge to $50 billion.

The administration has accused China of pressuring "foreign companies to transfer technology" if they want investment, of pursuing "policies aimed at limiting market access for foreign manufacturers", and not negotiating trade practices which will help reduce the trade deficit that Trump has made his mission to pare down.

The US buys more from China than it sells to the country, a trade deficit of $375 billion, and in order to reduce that deficit — a promise Trump made during his campaign trail — the US levied tariffs hoping consumers would turn to local products and to protect American jobs from what Trump calls “unfair trade practices”, according to a statement released by the White House.  

China has fought back with matching tariffs of the same amount on US exports to China.

In a tit-for-tat tariff war, the Chinese Commerce Ministry announced a 25% surcharge on $16 billion worth of US goods after the US green-lighted the August 23 tariffs. 

The duties imposed by the two countries will push up the prices of 1,300 goods altogether.

The 333 goods being targeted by China include vehicles, diesel, gasoline, propane, asphalt, fiber-optic cables, agricultural products and seafood.