Renewed Phase Of Economic Conflict Between The World’s Two Largest Economies
The USA–China tariff war in 2025 marks a new chapter in the ongoing economic showdown between the world’s two biggest powers. Sparked by Donald Trump’s re-election and his hardline trade stance, the conflict stems from deep-rooted issues like trade imbalances, intellectual property disputes, control over global supply chains, and broader geopolitical rivalry. This renewed standoff has sent shockwaves through the global economy, impacting not just the U.S. and China, but also many other countries connected through trade networks, supply chains, and diplomatic ties.
THE USA–CHINA TARIFF WAR IN 2025?
Background (2018–2024)
The trade war first erupted in 2018 when President Trump’s administration slapped tariffs on hundreds of billions of dollars’ worth of Chinese imports, citing issues like unfair trade practices, intellectual property theft, and a widening trade deficit.
In response, China hit back with its own tariffs, targeting key American exports such as agricultural products, automobiles, and energy.
A temporary pause came in 2020 with the signing of the Phase One trade deal, in which China pledged to boost its purchases of U.S. goods. However, many of the tariffs remained in place.
During President Biden’s term (2021–2024), there were efforts to review the tariffs, but most stayed in effect—largely due to ongoing concerns about China’s industrial strategies, human rights record, and rising military tensions.
The USA–China tariff war in 2025?
SKY-HIGH US-CHINA TARIFFS ARE A MUTUAL TRADE EMBARGO THAT WILL HURT BOTH SIDES
The ongoing tariff war between the U.S. and China could push one economy into recession and further destabilize the other’s already fragile financial footing. While the situation looks grim, the door to diplomatic reconciliation isn’t entirely closed.
With punitive tariffs now weighing heavily on both sides, the economic relationship between the U.S. and China resembles a de facto trade embargo—something typically reserved for wartime. The fallout is expected to be severe.
The USA–China tariff war in 2025?
U.S. exports to China, currently valued at around $150 billion, are likely to decline sharply. Meanwhile, China’s $440 billion in annual exports to the U.S. could drop by as much as 75% over the next year and a half, unless both sides return to the negotiating table. The impact won’t be limited to just these two giants; global markets and economies tied to them will feel the strain.
In the U.S., the consequences could trigger a mild recession by summer. What’s more, the trade conflict is weakening one of America’s key instruments of global influence: its financial system. Economic indicators—like consumer confidence, inflation, and capital spending—are all flashing red. Recent shifts in financial markets, including rising U.S. Treasury bond yields and a falling dollar, suggest investor anxiety is growing.
For China, the timing couldn’t be worse. Just last month, the Chinese Communist Party expressed deep concern over the vulnerabilities in its economic foundation. Though exports were booming last year—contributing to half of the country’s growth and outpacing global trade by threefold—China also posted a $2 trillion trade surplus in manufactured goods. Now, as the government struggles to stabilize its shaky property sector and address ballooning local government debt and deflation in asset prices, a major disruption to trade is the last thing it needs.
Trade Negotiations
The USA–China tariff war in 2025?
Trade negotiations won’t magically resolve the deep-rooted tensions between the U.S. and China—but they could buy some time and, at the very least, keep communication channels open.
The U.S. has made its goal clear: to contain China’s rise and slowly decouple its economy. Yet, despite its tough rhetoric, Washington hasn’t fully deployed some of its most powerful tools, like sweeping financial sanctions or tighter export controls. On the other side, China has long promoted economic self-reliance, and President Xi Jinping could escalate matters further if he chose to—by sharply devaluing the yuan or taking direct aim at American businesses operating in China.
Still, keeping negotiations alive might help de-escalate tensions, if only temporarily.
The USA–China tariff war in 2025?
The ripple effects of this standoff are already reaching far beyond Washington and Beijing. A striking example comes from the ongoing troubles at British Steel, owned by China’s Jingye Group. On the surface, it may seem unrelated—but there’s a deeper connection. Jingye has used its UK and French operations to produce steel branded “Made in UK,” allowing it to sidestep tariffs and trade barriers when selling to both the EU and U.S. It’s a telling sign of how global trade rules can be maneuvered—and how far-reaching the implications of this economic war truly are.
Trans-Shipment
Beyond direct investments, China has increasingly turned to “trans-shipment”—a tactic that involves routing exports through third-party countries to sidestep sanctions and trade barriers, while masking the goods’ true origin. This strategy has become especially common in parts of Asia, including Vietnam, Cambodia, Thailand, and India, as well as in Mexico. Today, roughly a quarter of China’s exports are believed to be trans-shipped in this way.
In response, the U.S. has implemented so-called “reciprocal tariffs” on over 100 countries, with the steepest tariffs aimed at nations in Asia. One of the key goals of these tariffs is to curb the spread of Chinese goods through indirect trade routes.
Recently, the U.S. announced a 90-day pause on these tariffs for countries other than China. This move appears to serve two purposes: first, to calm increasingly volatile U.S. financial markets; and second, to open a brief window for Washington to negotiate new trade agreements with key partner nations—potentially including clauses that limit trade and investment ties with China.
The EU and the UK appear now in “pause”
The USA–China tariff war in 2025?
The EU and the UK appear now in “pause” mode with respect to retaliation, formal channels have opened with Japan and South Korea, and the US reports encouraging signals from Vietnam, Cambodia, Thailand and India, for example. It is a complicated picture. Many countries are highly integrated into China’s trading system, but many have also implemented trade measures against China to protect their own manufacturing, jobs and communities. No one wants to lose access to the US consumer market, which is 30% of the world total. China’s mercantilist character means it will not and cannot fill the gap, and wants only to expand its exports.
The EU and the UK appear now in “pause”
The EU and the UK seem to be in a holding pattern when it comes to retaliatory measures, while formal diplomatic channels have opened with key players like Japan and South Korea. Meanwhile, the U.S. has reported positive signs from countries such as Vietnam, Cambodia, Thailand, and India.
The situation is complex. Many of these nations are deeply integrated into China’s trade networks, yet several have also introduced their own trade measures to shield local industries, jobs, and communities from Chinese competition.
At the same time, no country wants to risk losing access to the massive U.S. consumer market, which accounts for roughly 30% of global consumption. China, with its export-driven and mercantilist economic model, is neither positioned nor willing to replace that demand—it remains focused on expanding its own exports, not absorbing more from others.
Conclusion
The Trump administration’s approach to the trade war has often appeared chaotic and lacking in clear strategy. However, it’s important not to lose sight of the underlying reason this conflict erupted in the first place: China’s rapidly growing trade surplus.
At the core of this issue is a political and economic system that heavily supports domestic companies, distorts fair competition, limits access to its markets, and ultimately imposes significant economic costs on trading partners around the world.