Donald Trump’s re-election as the 47th President of the United States has reignited that debate and created new pressures. Our ongoing trade war with China is flaring up yet again. Back again in the 2024 election, Trump promised to go big. He promised to slap a punitive 60% tariffs on Chinese imports, citing unfair trade practices and widespread intellectual property theft. This latest wave of protectionist policies now risks exploding global supply chains and sabotaging economic stability around the world.
If Trump were to truly return as president on January 20, 2025, it would represent a seismic policy change for U.S. trade policy. His administration is looking to bring back the lost trade war glory from his first administration’s heyday. That trade war resulted in a series of retaliatory tariffs that cratered both economies. The effects of these policies are already visible around the world, with the result being an immediate slowdown in investment and consumer expenditures.
Background of the Trade War
Although the tip-off was long in coming, the U.S.-China trade war went into full swing after signing of the Phase One trade deal in January 2020. Under the auspices of this agreement, China committed to adopting structural reforms in its economic practices. It aimed to bring back confidence between the two countries. The deal only provided temporary stability.
Wanting to change course, soon after taking office President Joe Biden kept most of Trump’s tariffs in place and doubled down by adding more tariffs. The fierce protectionist stance has only served to further embolden the economic tit for tat. Consequently, the relationship between the two superpowers has eroded further into an open hostility.
While many analysts argue that the current trade war is more than an economic concern, it mirrors the growing geopolitical tensions within the wider stage at play. The complications at play underscore the problems that erupt when two nations stoop to ruthless protectionism.
Economic Impact and Global Repercussions
Additionally, the renewed trade war is playing a big part and exacerbating disruptions to already stressed global supply chains. As firms struggle with tariffs rising across the board, many investment firms are taking a second look at their investment practices. The effects of declining consumer spending are hard to miss. This shift is doing real work to push inflation measures such as the Consumer Price Index up.
Markets already showed their trepidation at Trump’s recent tariff announcements by sending U.S. Treasury bond yields plummeting. Investors are looking for a safe haven because of the unknowns in the current shift in trade policy. This frenzy has propelled the U.S. dollar deeper toward the multi-month lows it last touched in March.
“China urges the US to immediately cancel unilateral tariff measures and properly resolve differences with trading partners through equal dialogue.” – China’s Commerce Ministry
Considering these facts, the Chinese government has vocally opposed the tariffs. In response, the Indian Ministry of Commerce released a public statement promising strong countermeasures to protect Indian rights and interests.
“firmly opposes U.S. tariffs and will resolutely take countermeasures to safeguard its rights and interests.” – China’s Commerce Ministry
The developing controversial scenario has attracted the ire of other major market trading partners. Nearly 60 other countries have expressed their objections to the unilateral measures imposed by the U.S. government.
“Many trading partners have expressed strong dissatisfaction and clear opposition.” – China’s Commerce Ministry
Future Outlook
As both nations gear up for a potentially drawn-out economic contest, the consequences extend well beyond U.S.-China relations. The possibility of a prolonged trade war, meanwhile, continues to pose a threat to global markets and economic expansion.
As we have previously reported, economists and experts have been extremely worried that Trump would make good on his tariff promises. This would just encourage China to retaliate even further. As recent experience demonstrates, such moves would only deepen the current discord and produce an inevitable cycle of escalation harmful to both nations’ economies.