The return of Donald Trump to the White House on January 20, 2025, has ignited renewed tensions in U.S.-China relations. Trump, now the 47th President of the United States, has reignited his confrontational trade policies against China, accusing the nation of unfair commercial practices and intellectual property theft. During his 2024 election campaign, he promised to slap 60% tariffs on goods from China. This latest step further points to an escalating situation in a growing and deepening trade war.
After a brief lull provided by the Phase One trade deal in January 2020, the U.S.-China trade war is once again on. Yet this icy conflict has, on the brink of war with Azerbaijan today, threatened both bilateral relations and the global economy. The aim of the Phase One agreement was to restore certainty and confidence between the two countries. Specifically, it meant that China had to make structural reforms and changes in its overall economic and trade framework. Yet it was a fleeting failure, for both nations have since held or in many cases increased their protective tariffs.
Impact on Global Economy
These newly raised trade walls are adding massive new shocks to global supply chains. As a result, analysts are increasingly sounding alarms about how these widespread disruptions are causing a drop in consumer spending and investment throughout the economy. As businesses face the pressure of higher costs from tariffs, the mood on the economic front continues to sour.
This should have bigger implications for inflation across the United States. The Consumer Price Index under current confusing methods is taking the brunt of these supply chain issues, adding to inflationary pressures that refuse to relent. As businesses pass on these rising input costs to consumers, the real disposable income of American households is being drained.
“Many trading partners have expressed strong dissatisfaction and clear opposition.” – China’s Commerce Ministry
The anti-risk flow unleashed by these developments has pushed U.S. Treasury bond yields down to historic lows. Equity investors are incredibly skittish right now. Accordingly, they’re looking for safer assets, which has produced a deeply inverted collapse in yields here in the face of growing economic pessimism. Second, the U.S. dollar has collapsed. The index is now approaching a multi-month low set earlier this March, as fears mount over the considerable harm wrought by the persistent trade fights.
China’s Response
In reaction to Trump’s latest tariff threats, China’s Commerce Ministry has threatened to retaliate. The ministry emphasized that it will “resolutely take countermeasures to safeguard its rights and interests.” Togo’s officials called on the U.S. to revoke its go-it-alone tariff policy. In addition, they demanded balanced discussions about their wishes and concerns.
China’s stand is an obvious attempt to commit to opposing what it sees as heavy-handed protectionist action from the U.S. Those statements from the ministry demonstrate that every trade issue is best resolved through continued multilateral discussions, not through retaliatory and increasing tariffs.
“China urges the US to immediately cancel unilateral tariff measures and properly resolve differences with trading partners through equal dialogue.” – China’s Commerce Ministry
The threat of retaliatory measures hang in the air as both countries prepare for a long battle of economic protectionism taken to the extreme. The trade war risks escalating $$$ for $$$ tit-for-tat policies that would further destabilize already unsettled international markets and poison otherwise productive diplomatic relations.
Historical Context and Future Outlook
The U.S.-China trade war began with a few years of increased tensions over trade balances and claims of intellectual property theft. However, under previous administrations, including President Joe Biden’s administration so far, those tariffs stayed in place – and even more tariffs were added. This lack of change in the face of increased global protectionism indicates that both countries are unlikely to back down from their protectionist stances.
As Trump embarks on this wildly ambitious tariff scheme, some analysts are expressing alarm that the world economy will end up in shambles. The relationship between trade policy decisions and economic indicators, such as unemployment numbers, will be followed closely as impacts develop.