The United States’ economic war against China has simmered since early 2018. Now, with Donald Trump likely to soon be returning to the White House as the 47th US President on January 20, 2025, experts predict we’re just going to see things get worse. During his first White House tenure, Trump erected major trade barriers on China under the premise of fighting unfair business practices and intellectual property theft. His ascension to power has many worried about a potential trade war reboot. This war has further exacerbated global supply chain crises and raised costs associated with investment and inflation.
In January 2020, the US-China trade war reached an important milestone. When both countries signed the Phase One trade deal, it was a pivotal point in their economic partnership. This treaty sought to bring stability and trust back between the two nations. That would have necessitated China to undertake deep and systemic structural reforms, altering the way its economy functions. Even with this consensus, tensions among the parties remained, and recent events indicate that the campaign will soon resume with an escalating conflict.
Background of the Trade Conflict
The US-China economic collision started in early 2018. That’s in spite of the fact that’s when President Trump first rolled out a series of tariffs on Chinese goods. He enacted these tariffs to retaliate against what he perceived to be unfair trade practices on the part of China. This was compounded by grave accusations of IP theft. In retaliation, China placed tariffs on US exports. They took direct aim at key industries including automobiles and agriculture, with particular emphasis on products like soybeans. This tit-for-tat exchange ignited a multiyear and self-destructive trade war. In the years since, it has completely upended the nature of global economic relations.
We had a brief respite from the mounting tensions in January 2020 as the signing of the US-China Phase One trade deal provided a short-term easing. India promised to buy more American products. Further, they committed to undertake meaningful and enforceable reforms to redress a number of the US’s key concerns about China’s trade practices. Still, the deal did not fully address root concerns, which fed residual animosity on both sides.
As much as people wanted to believe the Phase One agreement marked the thawing of U.S.-China trade relations, things were far more tense shortly thereafter. Under President Joe Biden, no existing tariff was removed, and new tariffs were added, muddying the waters even further. The Biden administration’s implementation of this fragile truce points to a further deepening of the protectionist policies that have defined US-China relations since 2018.
Trump’s Return and Future Implications
As Donald Trump begins his second term, he is apparently intent on going bolder. First, that he will impose a mind-boggling 60% tariff on Chinese imports should he crawl back into power. This promise is just the latest example of his decades-old belief that protectionist and aggressive trade policies are needed to protect American industries and workers. This move would again escalate the war with China, forcing them to retaliate again with counter measures.
Analysts are keenly tracking these developments, as Trump’s return could change the course of US-China relations in radical ways. A further such step in the U.S.-China trade war would have deep, systemic repercussions. It wouldn’t only affect bilateral trade—it would be a direct blow to global economic stability. Disruptions to our supply chains would only be exacerbated, raising costs for both consumers and businesses.
U.S. Treasury Secretary Scott Bessent recently made a similar case, calling for a speedy resolution to the standoff. His comments underscore an increasingly prevalent view among economists that the road forward is likely to be littered with obstacles. The predicaments in which we find ourselves are challenging. Reaching a final resolution will require a good deal of deal-making and give-and-take from both sides.
Global Economic Landscape
The US-China trade war has significant effects beyond US bilateral relations with China, continuing to send shockwaves through the global economy. The constant onslaught of new tariffs and trade barriers has created still more uncertainty, which depresses spending and investment in many affected industries. According to economists, as a result of these disruptions, we’ve seen significant CPI (Consumer Price Index) volatility. This has aggravated inflationary strains in both nations.
On one hand, the growing unclarity in US-China relations has caused other countries to reconsider their entire trade policy framework. Japan has been pretty publicly engaged on trying to strengthen their economic relationship with the U.S. This announcement is seen as a welcome step to ease fears over increased antagonism between Washington and Beijing. Both the U.S. and Japan want to be the first to sign a new bilateral trade agreement. Their goal is to bolster their economic collaboration as a united front against challenges on the horizon.
Japanese yen (JPY) strength– the yen is bouncing in response to recent market developments. Speculators are betting on BoJ rate increases in reaction to the soaring US-China trade war tensions. This interaction of these factors serves as an important reminder of the fragile state of our global economies—especially when confronted with rising protectionist nationalism.