A renewed trade war between the United States and China appears increasingly likely after President Donald Trump threatened to introduce tariffs exceeding 100% on all Chinese imports as of Wednesday, April 9. In response, Beijing has vowed to "fight to the end" rather than yield to what it perceives as coercive economic diplomacy.
Given that the US and China are the two largest economies in the world, the escalation of trade hostilities between them carries serious implications—not just for bilateral trade, but for global economic stability. As rhetoric turns into policy, investors, manufacturers, and governments alike are bracing for broad-based disruptions.
Trade Volume and Trade Deficit: The Baseline
In 2024, bilateral trade in goods between the United States and China totalled approximately $585 billion. Of this:
-
US imports from China accounted for $440 billion
-
US exports to China were significantly lower, at $145 billion
-
The resulting trade deficit stood at $295 billion, roughly 1% of US GDP
While Trump has inaccurately cited a $1 trillion trade deficit, the actual figure remains substantial. Economists generally agree that such a trade imbalance is neither inherently harmful nor unexpected given global value chains and divergent consumer patterns, but it has been politically leveraged to justify protectionist policies.
The Tariff Legacy: Trump, Biden, and the Continuity of Economic Nationalism
During Trump’s first term, the administration imposed significant tariffs on a wide array of Chinese goods. His successor, Joe Biden, not only retained many of these measures but expanded the scope in certain strategic sectors such as semiconductors and telecommunications.
These cumulative trade barriers have had a visible impact. Between 2016 and 2023, the share of Chinese goods in total US imports fell from 21% to 13%. However, this apparent decoupling is complicated by transshipment practices, where Chinese exports are rerouted via third-party countries such as Malaysia, Vietnam, Thailand, and Cambodia—often to exploit tariff exemptions.
A US Department of Commerce report from 2023 documented how solar panel manufacturers had shifted final assembly to these Southeast Asian nations, while the core components continued to originate from China. The proposed "reciprocal" tariffs on these intermediary countries will thus have a multiplier effect, raising the cost of goods for American consumers and businesses alike.
Composition of Trade: Strategic and Consumer Goods
US Exports to China:
-
Soybeans – a major feedstock for China’s pig industry (estimated at 440 million animals)
-
Pharmaceuticals and petroleum products
Chinese Exports to the US:
-
Smartphones – representing 9% of all Chinese exports to the US
-
Consumer electronics, toys, and lithium-ion batteries (vital for electric vehicles)
Tariffs already in place—currently averaging 20%—have increased consumer prices. A full imposition of 100% tariffs, as Trump has proposed, would cause costs to quintuple in many categories, triggering inflationary pressure and dampening consumer demand.
Moreover, large multinational corporations like Apple, which depend on Chinese manufacturing for high-margin products, have already begun to feel the impact. The company’s stock price has declined 20% over the past month, a clear reflection of investor anxiety over supply chain risks and political uncertainty.
Beyond Tariffs: Technological Blockades and Resource Nationalism
In addition to traditional tariffs, both countries have a suite of non-tariff measures at their disposal.
China's Leverage:
China plays a pivotal role in the global supply chain for critical minerals such as lithium, copper, and rare earth elements. It has already implemented export controls on germanium and gallium, which are indispensable for military hardware including radar and thermal imaging systems.
Further restrictions could cripple certain US industries, especially those involved in clean energy, defense, and advanced manufacturing.
The US Response:
The Biden administration, and now Trump’s camp, have emphasized export controls on advanced semiconductors and AI-related technologies. The US could seek to further isolate China technologically by tightening restrictions and lobbying allies (e.g., Japan, the Netherlands) to curb the sale of lithography machines and chipmaking tools.
Former White House trade advisor Peter Navarro has gone a step further, suggesting the US could pressure countries like Mexico, Cambodia, and Vietnam to limit trade with China if they wish to retain access to the US market.
Such a policy would represent a dramatic shift toward economic containment, with potentially unpredictable consequences for global trade governance.
The Global Fallout: Risk of Contagion
Together, the US and China account for 43% of global GDP (IMF, 2024). A trade conflict of this magnitude would not remain bilateral in its effects. Key risks include:
-
Global economic slowdown or recession
-
Disruption to cross-border investment flows
-
Weakening of multilateral trade institutions such as the WTO
Additionally, China’s current $1 trillion trade surplus reflects its status as the world's top manufacturer, often producing more than its domestic market can consume. Much of this production is sustained by state subsidies and below-cost pricing.
If the US market closes, Chinese firms may attempt to dump these goods into third-party markets, undercutting local industries. The UK Steel association has already expressed concern over a potential flood of excess Chinese steel entering the British market, threatening domestic jobs and wages.
Conclusion: A Lose-Lose Scenario?
While both governments justify tariffs as tools of strategic leverage or national security, most economists agree that no party emerges as a winner from a full-blown trade war.
-
Consumers face higher prices
-
Companies deal with disrupted supply chains and squeezed margins
-
Emerging markets may be caught in the geopolitical crossfire
In the longer term, persistent decoupling may lead to two parallel global trading systems, undermining efficiency, innovation, and cooperative economic growth.
For now, markets and policymakers are watching closely. The return of protectionism at this scale could mark a pivotal turn in the structure of the global economy—a reversal of decades of trade liberalization and global economic integration.
🧠 Vocabulary Focus
Match the word and the definitions.
coercive economic diplomacy | tariff | trade deficit | transshipment | export controls |dumping |
a) Attempts to control or influence another country using economic pressure
b) The act of redirecting goods through another country to avoid restrictions
c) A government tax on imports or exports
d) The value by which imports exceed exports
e) Government rules limiting what goods can be sold to other countries
f) Selling goods below market value to gain an unfair advantage
Complete the sentences using the correct form of the word in parentheses.
The US government introduced --- measures to restrict China's access to advanced AI chips. (restrict)
A dramatic shift in trade policy could cause major global ---. (disrupt)
The practice of --- has complicated efforts to enforce tariffs. (ship)
Trump’s economic stance has been described as a return to ---. (national)
The --- of Chinese goods in US imports dropped significantly after 2016. (represent)
Many economists warn that protectionism will increase --- pressure. (inflate)
Collocations and Phrases
Choose the best collocation to complete each sentence.
The White House has vowed to fight to the end rather than --- to China’s demands.
a) collapse
b) yield
c) break
The imposition of 100% tariffs would --- the cost of consumer goods.
a) quintuple
b) compress
c) distribute
China's control of rare earths gives it significant --- power.
a) diplomatic
b) leverage
c) opposition
Some firms are already --- for disruption as the policy changes unfold.
a) searching
b) blaming
c) bracing
Complete each sentence with the most appropriate word from the list above.
🔑 Words to use: Leverage / yield / disruption / decoupling / bracing / dumping
After months of escalating tariffs, both countries are now --- for serious supply chain challenges.
China’s control over rare minerals gives it significant --- in trade negotiations with the US.
Some multinational companies have started to move operations out of China in a slow process of economic --- .
The steel industry in the UK is concerned about China --- excess products in their market at below-market prices.
Economists warn that further restrictions could cause major economic --- across global markets.
The US has refused to --- to pressure from Beijing regarding technology export controls.