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Photo Illustration: Sarah Grillo/Axios. Photos: Alex Wong/Getty Images and Lintao Zhang/Getty Images

Lost amid headlines about the coronavirus pandemic and the seemingly unstoppable stock market rally, has been the monthslong escalation of tensions in the U.S.-China trade war —  and it's likely here to stay.

Why it matters: The tariffs continue to impress a sizable tax on U.S. companies and consumers, adding additional costs and red tape for small businesses, farmers, manufacturers and households trying to stay afloat amid the pandemic.

  • "The trade war has been quietly intensifying," Stephen Gallagher, chief economist at Société Générale, tells Axios.

Driving the news: White House chief of staff Mark Meadows said late Wednesday that administration officials are "looking at the national security risk as it relates to TikTok, WeChat and other apps" from China and could announce bans in the coming weeks.

  • That followed remarks from President Trump on Tuesday that he had no plans for "phase two" trade deal negotiations and was "not interested right now in talking to China.”

What's happening: The "phase one" deal was cheered by investors as a positive first step, because it stopped a tit-for-tat tariff escalation that was poised to add a tax to nearly every product traded between the U.S. and China.

  • However, it did nothing about tariffs on hundreds of billions of dollars of Chinese imports already in place that are paid by U.S. companies.

Why you'll hear about this again: With the U.S. ratcheting up the pressure, there is a decreasing likelihood China lives up to its "phase one" agreement.

  • That means a diminished outlook for industries that were counting on the $200 billion in increased purchases of U.S. agriculture, energy and manufacturing after a brutal 2019.

Remember: The primary cost of tariffs isn't the tariffs themselves, but the deadweight loss of consumers buying more expensive, or less efficient, products.

  • The trade war also is a major factor pushing businesses to pull supply chains and production out of China, increasing costs and uprooting longstanding relationships.
  • For big companies, this will weigh on margins; for small companies, it could mean going out of business.

Don't sleep: Deutsche Bank’s global head of tech strategy Apjit Walia warns that the demand disruption, supply chain upheaval and bifurcated tech standards from a "Tech Cold War" between the U.S. and China could cost the sector more than $3.5 trillion over the next five years.

What's next: Even if Trump loses in November, investors don't expect a significant change in the U.S. approach to China given Joe Biden's recent rhetoric and bipartisan legislation condemning China for its treatment of Uighur Muslims and restrictions on public companies.

Go deeper

Oct 20, 2020 - World

China embraces hostage diplomacy

Illustration: Sarah Grillo/Axios

The Chinese government is threatening to detain foreign citizens unless their home governments do what Beijing demands. In some cases, China has already made good on those threats.

The big picture: This marks a potential evolution of China's "wolf warrior diplomacy" to outright rogue state behavior, putting it in the company of countries like North Korea and Iran, which have also engaged in hostage diplomacy.

Oct 20, 2020 - World

Right-wing media falsely ties Black Lives Matter movement to Beijing

Illustration: Sarah Grillo/Axios

Right-wing outlets and commentators have recently spread a false claim linking the Chinese Communist Party to the Black Lives Matter movement.

Why it matters: Such claims raise concerns that a real issue — that of Chinese government interference in U.S. politics — could be wrongly invoked along partisan lines to attack Americans engaging in legitimate activities.

Republicans pledge to set aside differences and work with Biden

President Biden speaks to Sen. Mitch McConnell after being sworn in at the West Front of the U.S. Capitol on Wednesday. Photo: Erin Schaff-Pool/Getty Images

Several Republicans praised President Biden's calls for unity during his inaugural address on Wednesday and pledged to work together for the benefit of the American people.

Why it matters: The Democrats only have a slim majority in the Senate and Biden will likely need to work with the GOP to pass his legislative agenda.