China-United States trade war - A summary

Translated by Silvia Toro

After just a few hours after taking office, Donald Trump had already informed Canada and Mexico of his intention to impose 25% duties on imports, accusing both the confining partners of not doing enough to stop the smuggling of drugs and migrants. On February 1st 2025, President Trump signed the relative executive order, which also included 10% duties on China. The following day, Trump admitted for the first time — in his own way — that duties might have negative effects on the United States, posting on social media: “WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!)”. These duties were suspended on February 3rd for Mexico and Canada, while the next day they went into effect for China. It responded with several safeguard actions on agricultural machinery, crude oil, coal, and natural gas.

The next week, the 25% duties on imports of steel and aluminum approved during his first term of office came back into force, followed by the announcement of a plan to impose reciprocal duties on US trading partners. A plan that would totally change global trade as it is now, and, according to Trump, it aims to force companies to bring back manufacture inside the American borders.

As for the suspended duties on Canada and Mexico, they went into effect on March 4th “as scheduled”, quoting Donald Trump, because, as he says, “drugs are pouring into our country from Mexico and Canada at very high and unacceptable levels”. A statement that has been denied by the reports of the American government itself. Not only that, he added another 10% tariff on China, which replied applying further tariffs on American agricultural products.

After a series of partial suspensions, out-of-scope threats and financial market chaos, on 2 April Donald Trump announced a strategy of reciprocal tariffs on a long list of countries, calling the date "Liberation Day". At the end of his speech, signing Executive order 14257, these countries found themselves subjected to often arbitrary tariffs: 49% on Cambodia, 46% on Vietnam, 44% on Sri Lanka, but most importantly, 34% on China (to be summed to the previous duties of 20%) and 32% on Taiwan.

The Chinese Ministry of Finance replied two days later with reciprocal duties of the same amount, banning 11 American companies in China for “cooperating with Taiwan on military technologies”. Donald Trump responded with an additional 50% of duties on Beijing, bringing the total duties on Chinese goods to 104% on April 9th. China responded immediately after just 12 hours adding a further 50%, bringing the total tariffs to 84% on American goods.

The same 9th of April, however, chaos in the financial markets forced President Trump to pause for 90 days all reciprocal duties, leaving only the universal 10% in force, except for China, which will suffer from an increase to 145%. On Friday 11, the Chinese Ministry of Finance responded by raising duties to 125%. He also announced that there would be no further increases “because American goods are no longer marketable with the current tariffs”, calling the measures imposed by Trump “a joke”. The latest news on the trade war between China and the US is from Saturday 12 of April, when Donald Trump declared that smartphones, computers, and 20 other product categories, general code 8471 included, will be excluded from the reciprocal duties imposed on China, calming down American big tech companies like Apple and Dell, which depend on imported products.

The first and most immediate consequence of the chaos created by the Trump administration in these last two months is surely the fall of the international financial markets, with a wave of “panic selling”, which is a mass selling of financial instruments caused by fear of impending devaluations, resulting in the highest market losses since 2020. According to an article in The Economic Times published on April 9, these losses amounted to 10,000 billion dollars or so.

The US Democratic Party accused President Trump of “insider trading“, which is trading bonds based on private information, or giving access to these pieces of information to a small group of people before they became public knowledge. In the morning of Wednesday 9th of April, Trump wrote on social media “This is a great time to buy!!!”, announcing less than four hours before the truce on tariffs of the “Liberation Day”. His Trump Media ad Technology Group, the company controlled by Trump’s oldest son, earned around 415 million dollars exactly that day, while the group of the richest American people earned in total 300 billion dollars or so in a single day.

A long trade war between the U.S. and China wouldn’t be anything but an exhausting test to see which population is able to tolerate the highest economic pain. According to the economist Erica York, “the 145% of total duties on Chinese imports would stop the majority of the trade exchanges between the United States and China”. The alarm went off especially for small and medium-sized enterprises, which does not have the tools to sustain this sudden decoupling.

Despite all the rhetoric about “the art of negotiation”, something Trump claims to be an expert in, it is clear that he’s simply improvising, and that a part from a redistribution of wealth among the richest people – whose intention will be confirmed in the future – it seems that Trump does not have “an endgame strategy” at all. If the American President actually believes that these duties will force China to negotiate, he’s underestimating the Chinese Communist Party and its population’s conception of Western powers. Moreover, Xi Jinping will never expose himself to a chaotic negotiation in the Oval Office, unlike the one had with the Ukraine President Volodymyr Zelenskyy.

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