The escalating trade conflict between the United States and China is set to have significant repercussions for the global economy, as the White House recently announced a staggering 84% tariff on all Chinese imports starting April 9, 2025. This move brings the total tariff on these goods to at least 104%, marking a dramatic escalation in the ongoing trade war.
In response to the U.S. decision, China has vowed to stand firm, stating it will "accompany to the end" and will not yield to what it perceives as coercive actions by the U.S. The Chinese government has already begun implementing countermeasures to protect its economic interests.
The scale of trade between the two nations is immense. In 2024, the total trade in goods between the U.S. and China reached approximately $585 billion. The U.S. imported $440 billion worth of goods from China, while it exported only $145 billion to China, resulting in a trade deficit of $295 billion, which accounts for about 1% of the U.S. economy.
Despite the significant figures, the share of U.S. imports from China has been on a downward trend, decreasing from 21% in 2016 to just 13% in the previous year. This decline indicates a shift in how the U.S. engages with Chinese products and markets.
The tariffs imposed by the Trump administration have already had a profound impact. For instance, in 2018, a 30% tariff was levied on Chinese solar panels. Recent findings from the U.S. Department of Commerce revealed that many Chinese manufacturers have circumvented these tariffs by relocating assembly operations to Southeast Asian countries such as Malaysia, Thailand, Cambodia, and Vietnam. Consequently, the U.S. plans to impose "equal" tariff measures on these nations, which will inevitably raise the prices of goods that originally came from China.
In terms of products traded, the most significant U.S. exports to China in 2024 included soybeans, primarily used in the livestock sector to feed China's approximately 440 million pigs. Additionally, the U.S. exported medicines and petroleum products to China.
Conversely, China's exports to the U.S. predominantly consist of electronic products, computers, and toys, with smartphones making up 9% of total U.S. imports from China. Notably, the recent tariffs have contributed to a 20% decline in Apple's stock value over the past month, emphasizing the direct impact on American businesses reliant on Chinese manufacturing.
As the tariffs potentially rise to 100%, experts warn that the effect on U.S. consumers could multiply by five, drastically increasing the cost of imported goods. This inflation would not only burden American consumers but also have a ripple effect on the Chinese economy, as retaliatory tariffs from China will raise prices on U.S. goods sold in China.
Beyond tariffs, the trade war could escalate through other avenues. China plays a crucial role in the global supply chain for key metals, including copper, lithium, and rare earth elements. Beijing has the capability to restrict exports of these essential materials to the U.S., similar to its previous restrictions on gallium and germanium, which are vital for military technology.
Meanwhile, the Biden administration has initiated its own technological blockade against China, limiting the export of advanced microchips that are critical for various industries, including artificial intelligence. This ongoing technological rivalry further complicates the already tense economic relationship.
Peter Navarro, a trade advisor to former President Trump, indicated that the U.S. might pressure countries like Cambodia, Mexico, and Vietnam to restrict their trade with China as a condition for maintaining their export privileges to the U.S. Such measures could further isolate China economically.
The potential fallout from a full-blown trade war between the U.S. and China extends beyond their borders. According to the International Monetary Fund (IMF), the two countries collectively account for about 43% of the global economy. A slowdown in their economic growth could drag other nations into recession, impacting global investment and economic stability.
China, as the world's largest manufacturer, has a surplus in commodity trade nearing $1 trillion. If these goods cannot find a market in the U.S., Chinese companies may resort to dumping their excess products into other countries, which could undermine local producers and threaten jobs and wages in those markets.
For instance, the UK Steel association has raised concerns that surplus steel from China could flood the UK market, undercutting local steel manufacturers. Such scenarios highlight the broader implications of the trade war, which could destabilize economies worldwide.
In summary, the trade conflict between the U.S. and China is not just a bilateral issue; it has the potential to disrupt the global economy significantly. As both nations prepare for a more aggressive stance, the consequences could be felt far beyond their borders, affecting consumers, businesses, and economies around the world.
