The global economic landscape braces for a renewed US-China trade war as former President Donald Trump prepares to return to office in 2025. The trade conflict, which began in early 2018 during Trump's first term, is expected to resume with tit-for-tat policies that previously disrupted international supply chains and contributed to inflationary pressures. Markets remain on edge, fueled by the uncertainty of upcoming US tariffs on Chinese, Mexican, and Canadian imports, amidst the ongoing Russia-Ukraine conflict.
The US-China trade war initially took shape when President Trump accused China of unfair commercial practices and intellectual property theft. In response, he imposed significant trade barriers, escalating tensions between the world's two largest economies. This confrontation continued until January 2020, when both countries signed the US-China Phase One trade deal. The agreement mandated structural reforms and changes in China's economic and trade policies, offering a temporary respite from the escalating conflict.
However, with Trump's anticipated return to office, the trade war is expected to resume with renewed vigor. The former president has already pledged to impose a 60% tariff on Chinese imports, signaling a potential escalation. This move could have far-reaching effects on global supply chains, reducing investments and further increasing inflationary pressures, particularly on the Consumer Price Index.
The impact of the US-China trade war extends beyond bilateral relations. Global markets remain unsettled as investors grapple with uncertainty surrounding the potential repercussions of new tariffs. Furthermore, ongoing geopolitical tensions, such as the Russia-Ukraine conflict, continue to add layers of complexity to an already precarious economic environment.
The US Dollar Index (DXY) reflects these uncertainties, edging slightly lower and trading near 107.00 at the time of writing on Monday. This dip follows last week's surge, indicating a search for nearby support amid market volatility. Similarly, the US 10-year yield trades around 4.25%, slightly down from last week's high of 4.574%.
Market participants keenly await economic indicators that could offer insights into future trends. The Institute for Supply Management (ISM) is set to release its manufacturing PMI report, providing a snapshot of the manufacturing sector's health. Additionally, the S&P Global Purchase Managers Index (PMI) final reading for February will be available at 14:45 GMT, potentially influencing market sentiments.