US-China trade tensions rose sharply since early 2018. The first round of direct confrontation starts with the US Section 232 tariffs on steel and aluminum imports, and China retaliated with tariffs covering roughly same amounts of US imports ($3 billion). Threats to impose 25 percent tariffs on about $50 billion imports from China by the United States under Section 301 of the Trade Act of 1974 started the second round, and China retaliated by releasing its own list of products that would be subject to proposed tariffs on imports from the US.
While tensions continue to climb, in May 2018, China and the United States started negotiations and deescalated the risk of an imminent trade war. US officials discussed trade issues with their Chinese counterparts in Beijing in early May, and a Chinese delegation led by Vice Premier Liu He visited Washington over May 15 – 19. During the last meeting, the two sides agreed to suspend the tariffs, reduce bilateral trade imbalance, and expand trade.  While details remain to be worked out, on May 22, China announced to cut import tariffs on autos from 25 percent to 15 percent, and tariffs on auto parts ranging from 8 to 25 percent will drop to 6 percent, starting from July 1, 2018. 
Days before a US delegation led by US Commerce Secretary Wilbur Ross to China to continue talks based on the agreement achieved during the last meeting in Washington however, on May 29, the White House announced that the final list of $50 billion Chinese products to be subject to the 25 percent US import tariff under Section 301 will be announced by June 15, 2018, and investment restrictions and export controls on Chinese entities and firms will be announced by June 30, 2018.  Meanwhile, the administration indicated that these restrictive trade and investment measures will be implemented shortly after such details are announced in mid- and late-June. Washington’s surprising renewed trade offensive against Beijing suggests that uncertainties still exist and risks of a catastrophic trade war remain high.
Since the Trump administration took office, US trade policies have undergone significant changes. As the United States are retreating from its global leadership role and turning toward more protectionist and inward-focused, the European Union (EU) and China, two major economies in the world and essential players in the global trading system, should take on more responsibilities to defend and support the rules-based global trading system together. Multilateralism but not unilateralism should be pursued. Though trade and investment frictions will rise from time to time, countries should maintain constant communications and policy dialogues, and manage differences in a constructive fashion. Importantly, trade disputes should be addressed by the World Trade Organization (WTO) for dispute settlement instead of imposing unilateral trade measures. Specifically, the EU, China, and the US should work together to solve China’s market economy status (MES) issue and coordinate to deal with the global steel overcapacity. Unilateral measures will only invite unilateral responses, and such unilateral actions will quickly escalate trade tensions and undermine the global rules-based system. Starting a trade war would be a disaster for all parties and for the rest of the world. Leaders in Beijing, Washington, and Brussels all understand the dangers.
Apart from the MES and excess steel capacity, both the US and the EU have raised concerns over China’s intellectual property rights (IPR) issues: the United States unilaterally initiated its Section 301 investigation on China’s IPR and forced technology transfer, and on April 4, 2018, the European Union asked to join the US in the WTO consultations with the China regarding the IPR. 
One proactive avenue for both the EU and the US to pursue their IPR demands with China is to resume the stalled negotiations of a bilateral investment treaty (BIT) with China. The IPR section of the BIT could draw on relevant chapters in the Trans-Pacific Partnership (TPP) or Korea-US Free Trade Agreement text, which set the gold standard for IPR terms. It should also be subject to the dispute settlement system to ensure effective enforcement of the IPR commitments. Historically China’s approach to trade and/or investment pacts is to start from a basic treaty and incrementally raise the standard of the agreement. However, even the BIT is not as high-quality as expected, it would still serve as a crucial framework for EU and US companies and investors, and parties could build on the agreement and push for more trade and investment liberalization in the future. Such a BIT could therefore be a constructive and pragmatic step to address the IPR concerns and to move toward closer Sino-US and/or Sino-EU economic relations.
 Joint Statement of the United States and China Regarding Trade Consultations, the White House, May 19, 2018, available here (accessed on May 21, 2018).
 Treasury Secretary Says U.S., China Have Suspended Tariffs, the Wall Street Journal, May 21, 2018, available here, and China to significantly cut auto import tariffs from July, Xinhua News Agency, May 22, 2018, available here (accessed on May 22, 2018).
 Statement on Steps to Protect Domestic Technology and Intellectual Property from China’s Discriminatory and Burdensome Trade Practices, the White House, May 29, 2018, available here (accessed on May 30, 2018).
 China – Certain Measures Concerning the Protection of Intellectual Property Rights, Request to Join Consultations, Communication from the European Union, World Trade Organization, available here (accessed on May 21, 2018).