The US-China trade war, first initiated during 2018, has returned with a vengeance ever since Donald Trump recaptured the White House. During his first go-around, Trump dubbed trade barriers on China. Now, barely eight months later, he has doubled down on that promise—which is rather surprising given that he’s doing so in his 2024 election campaign. Today the global economic landscape is rife with uncertainty yet again. Countries are retaliating through protectionist measures that break supply chains and increase costs for consumers.
Trump sparked the ongoing trade war in 2018, blaming China for their commercial practices and stealing of intellectual property. His administration released a spate of tariffs that China responded to, resulting in an ongoing and costly stalemate. That tit-for-tat quickly developed into a real trade war. Tariffs jumped, and the trade war between the two biggest economic powers in the world escalated.
Impact on Global Supply Chains
The US-China trade war has already inflicted a shocking level of disruption to global supply chains. Companies have struggled against the bottom line impacts of rising costs due to tariffs. They’ve responded by reducing their overall spending and investment. These disruptions have severely impacted businesses on both sides of the border. They’ve produced ripple effects that reverberate through international markets.
Additionally, companies are recalibrating their supply chains, and many are confronting skyrocketing production costs. This recent jump in expenses is affecting overall Consumer Price Index (CPI) inflation rates. The adverse economic effects of the trade war have prompted economists to closely monitor trends in consumer spending, which is critical for sustained economic growth.
“China and US have used multilateral and bilateral occasions to maintain communications at various levels.” – Chinese Commerce Ministry
The say more About every day dynamic nature of this trade conflict has put historic strain on all businesses with predictable supply chains at their core. Supply chain uncertainty is driving companies toward greater risk aversion in their investments. They need to look very seriously at the risks associated with increasing tariffs and the risk of retaliatory measures by China.
Legal Challenges and Investor Reactions
The legal landscape surrounding Trump’s tariffs has changed. That’s why a recent ruling by a US court, blocking the imposition of Trump’s proposed trade tariffs, came as such relief to investors. This move increased market certainty, as it lessened concerns of quickly escalating tariff levels.
Though this legal victory is a huge win for clean air, it does not ensure long-term security. The latter step—becoming attuned to change—is as ever imperative for investors as they position themselves amid the uncertain waters of a rapidly changing US-China trade relationship. Even traditional safe-haven assets such as bullion saw wild swings. Market participants did not take lightly the strong market reaction that followed the court’s decision and its potential for tariff policy moving forward.
“Focused on US export controls abuse in semiconductors sector.” – Chinese Commerce Ministry
The semiconductor industry has been the epicenter of this trade war. Along these lines, both countries are taking up and vigorously enforcing measures that play to their strategic advantage. China’s response to US export controls has underscored its commitment to protecting its technological advancements and maintaining its position in the global market.
Continued Tensions and Retaliatory Measures
As President Joe Biden took office, he opted to maintain many of the tariffs imposed by his predecessor while introducing additional levies. Beyond that, this decision represents the broader troubling trend of increasing US-China relations’ complexity. Yet it underscores the obstacles both countries face in reaching a win-win solution.
In retaliation to Biden’s trade policies, China responded with punitive action of their own, placing tariffs on a plethora of US products like soybeans and American made cars. These actions further complicate the already fraught economic relationship between the two countries. They further contribute to the volatility of global markets as a whole.
“Very concerned by the EU tire anti-dumping probe. Will defend legitimate rights, interests of Chinese firms.” – Chinese Commerce Ministry
China’s problems run deeper than its bilateral ties with U.S. It monitors the rules of international trade, particularly any changes that impact other countries, closely. In a parallel investigation, the EU is looking into potential Chinese anti-dumping practices on tires. This is causing panic in Beijing, where officials are hell bent on shielding their domestic players.
Despite efforts to negotiate a resolution, the complexities of the US-China trade war remain evident. Signed in January 2020, the Phase One trade deal required China to enact unprecedented structural reforms. It didn’t fix all the root problems. The evolving political landscape adds another layer of uncertainty as stakeholders await clarity on future trade policies.