US-China Trade War Escalates with New Tariffs
The trade conflict between the United States and China has intensified as President Donald Trump announced tariffs exceeding 100% on a range of Chinese imports. In response, China has vowed to “fight to the end,” escalating tensions between the two economic giants. This growing trade war raises critical questions about its implications for the global economy.
Trade Volume Between the US and China
In 2024, trade between the United States and China reached approximately $585 billion (£429 billion). The US imported significantly more from China, totaling $440 billion, while exports to China amounted to $145 billion. This imbalance resulted in a trade deficit of $295 billion for the US, representing about 1% of its economy. Although President Trump has claimed a deficit of $1 trillion, the actual figure is considerably lower.
During his first term, Trump implemented substantial tariffs on Chinese goods, a policy that was continued by his successor, President Joe Biden. These tariffs have successfully reduced the share of Chinese goods in US imports from 21% in 2016 to 13% last year. Despite this decrease, some Chinese exports have been rerouted through Southeast Asian countries to evade tariffs. For instance, after the Trump administration imposed a 30% tariff on solar panels in 2018, evidence emerged in 2023 that Chinese manufacturers shifted assembly operations to countries like Malaysia and Vietnam, allowing them to export finished products to the US without incurring tariffs. The new reciprocal tariffs on these countries will likely increase prices for a variety of goods originating from China.
Key Imports and Exports
In 2024, the primary export from the US to China was soybeans, essential for feeding China’s large pig population, estimated at 440 million. Other significant exports included pharmaceuticals and petroleum. Conversely, the US imported vast quantities of electronics, computers, toys, and batteries from China, with smartphones being the largest category, accounting for 9% of total imports. Many of these smartphones are produced for Apple, a US-based multinational company.
The tariffs imposed on Chinese goods have contributed to a decline in Apple’s market value, with its share price dropping by 20% in recent weeks. The existing 20% tariff on Chinese imports is set to rise to 104%, potentially amplifying the financial burden on American consumers. Similarly, China’s retaliatory tariffs on US imports will likely lead to increased prices for Chinese consumers, creating a ripple effect in both economies.
Potential Global Impact of the Trade War
The US and China together account for approximately 43% of the global economy, according to the International Monetary Fund. An all-out trade war could slow economic growth or even lead to recessions in both countries, adversely affecting economies worldwide. Slower global growth would likely deter investment and disrupt international trade.
China, as the world’s largest manufacturing nation, produces more goods than it consumes domestically, resulting in a nearly $1 trillion goods surplus. If US markets close to Chinese products, there is a risk that Chinese companies may attempt to “dump” excess goods in other markets, potentially harming local producers and threatening jobs. For example, the lobby group UK Steel has raised concerns about the possibility of excess steel being redirected to the UK market, which could undermine domestic producers. The ramifications of a full-scale trade war between the US and China would be felt globally, with most economists predicting a highly negative impact on economic stability and growth.
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