U.S-China Trade War

Translated by Silvia Toro

In just a few weeks, the trade war between the USA and China has entered a new and more critical phase, after both sides escalated their trade politics. After the United States raised duties up to 145% on Chinese goods, China responded by imposing tariffs up to 125% on American goods. This creates a Catch-22 situation that threatens to hit both economies hard.

Beijing aims to “reciprocate” duties and warned that, if the United States continues with these detrimental measures, China will respond even more forcefully. As well as raising tariffs, it has also reported the United States to the World Trade Organization (WTO) for violating international trade rules. This escalation has already had concrete effects on the market, namely a reduction of 25% on container reservations, delays in shipments, canceled orders, and layoffs in some companies. Major global companies such as Amazon are already cutting ties with their Chinese suppliers, while others are completely rethinking their trading plans.

In 2024, the commercial exchanges between the United States and China reached a value of 582 billion dollars, but they were already falling. If duties continue to rise, the consequences could be devastating. The risk of higher prices, inflation, business failures in the USA, and huge damages to American agriculture is indeed tangible.

The reasons behind the economic policy of Donald Trump are clear: to reduce the trade deficit with China and answer back to what he considers a growing economical, political, and military threat from Beijing. Trump has always believed that the United States has been treated poorly by its commercial partners, and his administration aims to re-balance the trade equilibrium with China and to reduce their economic ties. The evident trade imbalance, shown by the fact that the USA in 2024 ran a 295 billion dollar deficit with China, is one of the main reasons for his strong stance.

Despite his aggressive speeches, Trump declared feeling optimistic about the possibility of a deal with China. And negotiations, according to the president, are proceeding smoothly. However, Xi Jinping, China’s leader, has given a message of resoluteness and independence, underscoring that China does not fear the trade war and blaming the United States for being responsible for the global economic chaos caused by its policies.

In the meantime, the concrete effects of this trade war are already hitting hard. Key sectors such as mechanical and electronic are already feeling its effects. The United States heavily relies on China for imports of advanced technology products like computers and batteries, while China relies on the United States for its exports of electronic components. Even the automotive sector has been partially affected, as parts and components are more vulnerable than the import of complete cars.

Meanwhile, the pharmaceutical sector in China is struggling because a significant proportion of its medicines are imported from the United States. In general, the chemical, plastics, textile, and consumer goods industries have been dramatically influenced by trade policies since both nations are dependent on the respective productions. China is trying to diversify its export markets, but it won’t be an easy process. Sending goods that were destined for the United States to other international markets might create economic imbalances and harm countries that, even if not directly involved with the conflict, will suffer collateral damage. The risk of a drop in Chinese exports could cause a reduction of China’s GDP between 1.5% and 2%, with a direct impact on youth unemployment.

Conversely, China's impositions of duties on American agricultural goods, specifically soybeans, are directly impacting Midwest farmers, and are harming a fundamental industry for the American economy in a significant way. Other areas, such as tourism and educational exchanges between the two countries, might suffer from the situation as well.

The effects of this trade war are touching not only the economic aspect, but also political and social situations, endangering the global market balance. As negotiations continue, medium- and long-term consequences are still uncertain, with the risk that the global economy might suffer further shocks.

Mondo Internazionale APS - Riproduzione Riservata ® 2025