Tensions between the United States and China have escalated once again, reigniting the trade war that began in 2018. The conflict, which initially arose during President Donald Trump's administration, saw a resurgence in 2025 when Trump imposed a staggering 60% tariff on Chinese imports. This move followed a period of relative calm after the US-China Phase One trade deal was signed in January 2020. The agreement aimed at structural reforms in China's economic and trade regime, but the truce appears to have been short-lived.
China retaliated by imposing tariffs on various US goods, including automobiles and soybeans, intensifying the economic conflict. The trade war, characterized by extreme protectionism, has had a profound impact on the global economic landscape. It has disrupted supply chains worldwide and led to reduced spending and investment, with significant implications for international markets.
US Senior Republican Senator Mitch McConnell has been vocal in his objections to the tariffs pushed by President Trump. Despite his opposition, President Joe Biden has maintained many of these trade barriers and even added additional levies since taking office. The ongoing trade tensions have resulted in volatility across financial markets, with the US Dollar Index (DXY) climbing to three-week highs near 109.80 as investors sought safe-haven assets.
The EUR/USD pair has also experienced significant fluctuations due to the trade conflict. During the early Asian session, the pair plunged to a three-week low, with spot prices moving closer to a two-year low touched in January. This decline was compounded by intense risk aversion stemming from President Trump's tariffs on Canada, Mexico, and China. The trade war's impact on currency markets highlights the far-reaching effects of such economic conflicts.
The Consumer Price Index inflation has been directly affected by the ongoing trade war. As tariffs increase the cost of imported goods, consumers and businesses alike have faced rising prices, contributing to inflationary pressures. The economic uncertainty generated by the trade conflict has further exacerbated these issues, creating challenges for policymakers seeking to stabilize prices.
In addition to traditional markets, the cryptocurrency sector has not been immune to the turmoil. A full-blown crypto meltdown unfolded as markets spiraled into risk-off mode, with virtually every coin experiencing significant losses. Investors have retreated from riskier assets amid the heightened uncertainty, leading to a widespread sell-off in digital currencies.
The global economic landscape faces substantial challenges as the US-China trade war continues to unfold. With both nations imposing significant tariffs on each other's goods, businesses are confronted with increased costs and disruptions to their supply chains. This environment has led to reduced investment and spending, impacting economic growth worldwide.