The first shots of the US-China trade war were fired in early 2018. Now, hostilities between the two economic titans are rising dramatically, entering a dangerous chapter in their ongoing clash. President Donald Trump sparked the dispute by accusing China of duplicitous trade practices and IP theft. Since then, this situation has changed considerably, most importantly with the signing of the US-China Phase One trade deal in January 2020. Even as they work to re-establish calm, the trade war’s influence continues to ripple through the global economy. These effects affect spending, investment, and ultimately inflation.
Then in 2025, the trade war flared back up. When both nations enacted tit-for-tat policies, it caused serious alarm within economists and the global market. Indeed, President Trump is already campaigning for re-election in 2024. He’s promised to slap a record 60% tariff on Chinese products if he gets back into office. This most recent round of threats has raised alarm again over their potential long-term effects on the global supply chain and overall global economic growth.
The Origins of the Trade War
The US-China trade war started in early 2018. That’s when President Trump adopted an assertive trade policy to address the trade deficit between the two countries. He called them out for their intellectual property theft from American companies, pegging them as manipulators in his unfair trading practices accusations. In retaliation, Trump launched a wave of tariffs on Chinese goods. This fateful military activity prompted a tit-for-tat cycle of deterrent penalties that characterized the contest.
During the peak of the trade war, both countries were under increasing domestic political pressure to come to a settlement. After almost two years of talks and farm-killing retaliatory tariffs, that moment finally arrived in January of 2020. They just signed the doomed US-China Phase One trade deal. This trade agreement was one of the few that addressed the root causes of trade tensions. In doing so, it needed to force China to take structural reforms and demand drastic changes to its crony capitalist economic and trade practices.
The Phase One deal was a significant step toward restoring trust and stability between the two countries. Recently, confidence in its effectiveness has been shaken. As many analysts have pointed out, China’s commitments are not enough. Finally, they argue that none of these promises get to the root cause of what started the war in the first place.
Continuing Economic Impact
Since the beginning of the trade war, its effects on the global economic landscape have been significant. In addition, disruptions to global supply chains have become an everyday reality as companies continue to navigate uncertainty related to tariffs and trade policies. This ongoing uncertainty has caused tragic cuts to spending and investment, crippling broader growth potential both in the public sector and private sectors.
Additionally, the trade war has fueled inflationary pressures in the U.S. Tariffs increased the prices of imported products, leaving businesses no choice but to pass those costs on to their customers. As a consequence, we experienced a jump in the CPI. Global supply chains have never been more interconnected. Unfortunately, the collateral damage from the US-China trade war is being felt far beyond US-China relations – impacting economies around the world.
When President Joe Biden took office in January 2021, he inherited the Work Plan. He chose to maintain a lot of the tariffs that his predecessor had placed. He claimed that these cruel tariffs were the only thing keeping American businesses from being destroyed by foreign competition. In some cases, Biden even added additional levies on Chinese goods as part of a broader strategy aimed at addressing longstanding grievances against China’s trading practices.
The Resurgence of Tensions
Renewed hostilities and aggressive tariffs have continued the US-China trade war into another chapter, as of 2025. With President Trump prepping for a second term, TCI faces an uncertain future. He has threatened a 60% tariff on all goods imported from China. This would further expose the underlying resentment that has developed between the two superpowers. Retaliation of that magnitude in tariff increases would be devastating not only to both nations’ economies, but to global trade as well.
The re-emergence of tit-for-tat policies raises questions about how other countries will respond and what strategies they will employ to mitigate potential fallout. Countries around the globe are dependent on prosperous trade partnerships with China and the US. If tensions continue down the warpath, it risks plunging the entire world into economic turmoil.
Observers are, of course, keenly attuned to the ongoing political dramas in both countries. In addition, they’re monitoring for progress in their own bilateral negotiations. The stakes couldn’t be higher! Ongoing tensions could lead to significant balkanization of global trading systems and exacerbate already difficult economic conditions.