An economic conflict between the United States and China, which began in early 2018, has resurfaced, drawing global attention. Initially sparked by President Donald Trump's decision to impose trade barriers on China, citing unfair commercial practices and intellectual property theft, the conflict took a dramatic turn as China retaliated with tariffs on American goods like automobiles and soybeans. Despite the signing of the US-China Phase One trade deal in January 2020, which sought to stabilize relations through structural reforms and economic changes in China, tensions have reignited. As President Trump imposed 60% tariffs during the 2024 election campaign, President Joe Biden maintained these tariffs and added additional levies, signaling a continuation of the trade war.
The escalating trade conflict has had far-reaching effects, disrupting global supply chains and leading to reduced spending and investment. Tit-for-tat policies between the world's two largest economies have fed directly into the Consumer Price Index inflation, further complicating the global economic landscape. The US Dollar struggles to hold its ground as US Treasury yields decline, contributing to economic uncertainty. Meanwhile, after three consecutive losing days, the global cryptocurrency market rebounded by 1.6%, reaching a value of $3.13 trillion on Wednesday. Bitcoin, in particular, saw a resurgence, reclaiming the $97,000 level after falling to a 15-day low of $93,388 on Tuesday.
The trade war's origins trace back to early 2018 when President Trump levied tariffs on Chinese imports, aiming to address perceived economic imbalances and protect American intellectual property. China's swift retaliation with tariffs on US exports intensified the conflict, affecting various sectors. The unresolved issues fueled an escalation that led to the US-China Phase One trade deal in January 2020. This agreement was designed to restore stability and trust between the two nations by requiring China to implement structural reforms and modify its trade practices.
Despite the Phase One trade deal's intentions, the trade war continued to simmer beneath the surface. In 2024, President Trump reintroduced steep tariffs as part of his election campaign strategy. When President Biden assumed office, he chose to maintain these tariffs and even expand them, suggesting that the US intended to resume the trade war where it had left off. These actions have had significant implications for global supply chains, intensifying existing disruptions and leading to a reduction in spending and investment worldwide.
The economic fallout from the renewed trade tensions extends beyond direct trade impacts. The ongoing conflict has contributed to rising inflation rates by increasing the costs of goods and services. The Consumer Price Index reflects these inflationary pressures, affecting consumer purchasing power and overall economic stability. Additionally, the US Dollar faces challenges as it struggles to maintain strength amid declining Treasury yields. The US Dollar Index recorded a slight decrease of 0.17%, trading near 107.00 at press time.
Amidst these economic upheavals, the global cryptocurrency market has experienced fluctuations. After a period of decline, the market rallied by 1.6%, reaching a total value of $3.13 trillion on Wednesday. Bitcoin's price recovery was notable, with a 4% increase allowing it to regain the $97,000 territory after hitting a low of $93,388 just a day prior. These developments highlight the volatility and dynamic nature of digital currencies in response to broader economic trends.