U.S.-China trade tensions: Their causes and consequences
- Rick Dunham
- 17 hours ago
- 9 min read
Updated: 12 hours ago
By RICK DUNHAM
Global Business Journalism program co-director
Tariffs have always been about more than just economics. They are tools of power and leverage, expressions of national priorities and xenophobic fears.
But the 2025 U.S.-China trade standoff marks a profound shift. The on-again, off-again tariff war is not just a fight over trade imbalances, but a battle over the very future of global order and the hegemonic ambitions of the world's two largest economies. It is a psycho-political clash between a president who vows to “Make America Great Again” after a decades-long manufacturing decline and a Chinese president who pledges to “Make China Great Again” after a century of shame at the hands of Western economic exploitation and Japanese military terror.
To understand where we are today, it’s necessary to go back three decades, when U.S. President Bill Clinton and Chinese leader Jiang Zemin in 1998 negotiated China’s entry into the World Trade Organization, and two years later, when Clinton signed legislation granting China most favored nation trade status.
China’s economy boomed, and its GDP zoomed from $1.2 trillion to $6.2 trillion in the century’s first decade. U.S. consumers, meanwhile, benefited from the sudden availability of low-cost Chinese products, but nearly two million manufacturing workers lost their jobs between 2000 and 2007 in what was dubbed “the China shock.”
Trump's first tariff war
Tensions between Washington and Beijing simmered for years as the nations traded complaints over human rights, economic bullying, intellectual property theft and market access, but they boiled over during the first Trump administration. In 2018, the United States imposed $350 billion of tariffs on Chinese goods, citing unsustainable trade imbalances, unfair trade practices and intellectual property theft. China retaliated with tariffs of its own, matching U.S. tariffs almost dollar-for-dollar.
Suddenly, two of the world’s largest economies were locked in a tit-for-tat spiral that affected industries from agriculture to technology. The stakes weren’t just economic. Rather than fighting over sales of soybeans or jets, the tariffs were part of a struggle over controlling the rules of trade for the 21st century. Trump administration officials argued that tariffs were a necessary weapon against Chinese-style mercantilism, a system where state-owned enterprises received massive subsidies, foreign companies were forced into technology transfers, and markets were systematically distorted.
While there was a brief thaw — notably the 2020 “Phase One” trade deal, in which China agreed to buy more American products — underlying tensions never truly eased. American officials accused China of failing to comply with its promises to purchase those U.S. goods.
When Joe Biden defeated Trump in 2020, many trade experts expected a tariff rollback. Instead, Biden kept most levies in place, while introducing new targeted measures on Chinese technology and semiconductors, emphasizing national security concerns.
But domestic political pressure ahead of the 2024 presidential election created a news flashpoint. In May Biden announced a 100% tariff on all Chinese electric vehicles and a 50% levy on solar cells. The move came after U.S. automakers warned that a flood of inexpensive Chinese EVs was threatening their survival, and unions, environmentalists and human rights organizations pressed Biden to punish China.
“We cannot trade a dependency on foreign oil for a clean energy future reliant upon China," Ben Jealous, then the executive director of the environmentalist Sierra Club said at a 2024 White House event.
China responded swiftly. Within days, Beijing imposed tariffs of up to 50% on U.S. agricultural exports, including soybeans, corn, beef, and dairy products. The Chinese Ministry of Commerce accused the U.S. of “naked economic bullying” and filed a formal complaint with the World Trade Organization.
China trade deficit targeted by Trump
Trump returned to office in 2025 with a promise to implement tariffs from the first day of his administration. While his first targets were friends and neighbors Mexico and Canada, he soon turned to China. He started with a 10% tariff on all Chinese imports, effective February 4, tied to alleged fentanyl trafficking. As always, China retaliated, this time with targeted tariffs on energy and machinery, plus new investigations of American companies for unspecified violations.
But Trump wasn’t through. He doubled his tariffs in March, then increased the rate to a whopping 54% on so-called “Liberation Day,” April 4. When China once again responded, Trump went ballistic, choosing 145% as his tariff rate of the moment. China chose 125%.
The tit-for-tat trade war froze commerce, rattled stock markets and puzzled the global economy. Trump’s actions were unprecedented in several ways:
Unlike past tariff wars, the Trump levies are no longer confined to particular industries like steel or solar panels. Entire sectors — especially in green technology, digital goods, and agriculture — are now battlegrounds. In some cases, entire countries like Brazil are being targeted for personal vendettas.
Tariffs are being paired with non-tariff weapons: export controls on critical technology, bans on Chinese apps, investment restrictions, and visa limits on scientists and engineers.
In one of the starkest breaks from historical norms, tariffs are now being intertwined with national security concerns. Both the Biden and Trump administrations cited China’s control over critical supply chains, from rare earth minerals to semiconductors, as reasons for tariffs and investment restrictions. Biden's national security adviser, Jake Sullivan, said in 2023 that American trade policy was about "safeguarding national security" and protecting "the very foundations of our economic future."
The trade wars are being framed explicitly as a clash of economic systems, not only about unfair trade practices.
"I’m really excited that we are rallying Americans to be anti-China," self-proclaimed America First journalist Laura Loomer, an informal Trump adviser, posted on the social media platform X. "We need more anti-CCP energy in our country," she added, referring to the Chinese Communist Party. "It’s about time that we wake people up to the fact that the CCP is our enemy."
Nationalism on both sides of the Pacific
American politicians are heating up the rhetoric in a bipartisan frenzy. Congress in March passed the American Supply Chains Protection Act, mandating that critical goods (like semiconductors, pharmaceuticals, and rare earth elements) must be manufactured either domestically or in “trusted partner nations.”
“To achieve a strong, resilient, supply chain, we must have a coordinated, national strategy that decreases dependence on our adversaries, like Communist China, and leverages American ingenuity," said Senator Marsha Blackburn, a Tennessee Republican.
In response, China's state media has ratcheted up its rhetoric to levels reminiscent of the Cold War.
“The U.S. should stop whining about itself being a victim in global trade and put an end to its capricious and destructive behavior,” the Communist Party's China Daily wrote in an April 16 editorial. "It has outsourced its manufacturing and borrowed money in order to have a higher standard of living than it’s entitled to based on its productivity. Rather than being ‘cheated,' the U.S. has been taking a free ride on the globalization train.”
Each twist and turn in the war is the subject of social media trolling and government spin. Chinese nationalists were particularly gleeful when Trump retreated from 145% to 30% tariffs on May 12 and decided to negotiate.
“This is called, ‘victory,’” Hu Xijin, the retired editor of the state-controlled Global Times, reveled on the Weibo social media platform. “Today we have definitely driven the Americans back to the 38th parallel! [a reference to the pre-war Korean border]."
Hu's allusion resonates deeply among Chinese superpatriots. More than 1 million Chinese troops famously drove American and other United Nations troops to retreat to near the 38th parallel after the UN forces had conquered nearly all of North Korea in the fall of 1950 in a counteroffensive following the North's summertime invasion of the South. The war ended in 1953 after more than two additional years of bloody stalemate.
Reaction in the United States has predictably divided into pro- and anti-Trump camps, with MAGA faithful calling Trump a master dealmaker who is on his way to a comprehensive trade deal that will level the playing field with the cheating Chinese. Critics among mainstream economists and Democrats say Trump chickened out (the term “TACO” was coined with the meaning “Trump Always Chickens Out” on tariffs) after China responded forcefully to his tariff bluster.
“Trump’s sudden about-face on the most psychotic tariff rates reassured markets that he wouldn’t simply melt the economy down to slag on a whim,” Andrew Egger wrote in The Bulwark on Aug. 15. ”Instead, he introduced traders to the TACO model and gave them an object lesson in the pleasures of buying the dip. Monthly jobs reports kept coming in strong … and consumer prices continued to rise relatively slowly, making Trump’s insistence that companies would simply ‘eat’ the cost of the tariffs look facially plausible.
“But much of this now appears to have been a mirage.”
Indeed, the trade tensions, and the economic uncertainty they have created, are already causing real economic damage:
Inflation continues to inch up in much of the world – but particularly in the United States – as the highest tariffs in a century are slowly passed along to consumers.
U.S. farmers face a second major hit, eerily reminiscent of the 2018–2019 pain, as Chinese buyers pivot to Brazil, Argentina, and Russia for agricultural imports.
Global supply chains are scrambling again. Companies that once thought they had weathered the U.S.-China trade storms are now exploring further diversification to India, Vietnam, Mexico and Eastern Europe.
“We appear to be running headlong into a bog, sinking waist-deep in muck,” Egger writes. “Trump’s tariffs are congealing around the economy, making all international trade that much more sluggish and costly. The result is a straightforward hit to prosperity. Prices will rise, growth will slow, interest rates will stay elevated. Maybe the economy will bear up under it all and the arrow will keep pointing upward. But if it does, it’ll be doing so through a thick miasma of tariff-induced drag.”
China's global role
China, meanwhile, has accelerated its "dual circulation" strategy — focusing on domestic production and internal consumption to lessen reliance on U.S. technology and markets. Chinese manufacturers have shut down production, at least temporarily, in factories in Guangdong and other provinces. Some companies are exploring outsourcing to lower-cost labor markets.
At the same time, the Chinese government has reached out to nations around the world, from ASEAN countries in Southeast Asia to the European Union, to restate a commitment to the pre-Trump global trading order.
“China is increasingly playing a stabilizing role in the global system as others retreat,” argues Wang Huiyao, the founder of the Center for China and Globalization. As the United States withdraws from liberal internationalism and scales back support for multilateral institutions and public goods, China is filling critical gaps.”
In the short run, experts on both sides of the Pacific expect a lull before the next storm — or historic megadeal. A leading Chinese scholar predicts that Trump will continue to extend trade negotiations or accept preliminary, interim deals that do not address fundamental disagreements.
“This approach offers at least two clear advantages,” Zhang Yuyan, dean of the School of International Politics and Economics at the university of the state-run Chinese Academy of Social Sciences, told Pekingnology. “First, it buys time and helps cushion the [American] domestic market from abrupt price shocks; second, it consolidates the administration’s initial gains and sets the stage for the next phase of negotiations.”
If the United States and China do not reach a permanent cease fire in their trade war — and Trump does not back down on tough tariffs — the entire global economy will suffer, says Callum Glennen of the World Finance website. The World Bank warned in an April report that a fully decoupled global economy could shave 2% off world GDP by 2030 — trillions of dollars in lost wealth.
"No one wins," Glennen wrote. "Both economies will suffer from the tariffs, and neither is likely to see a significant redevelopment of their local industries.”
In a global economy that craves stability, Trump has injected ongoing chaos.
“Nothing is certain but uncertainty when it comes to Trump tariffs!” Tengku Zafrul Aziz, Malaysia’s Minister of Investment, Trade and Industry, posted on LinkedIn.
U.S.-China trade tensions at a glance
Timeframe | U.S. Tariffs | Chinese Response | Outcome |
Feb.–March | 10% → 20% | Selective retaliatory tariffs | Escalating trade conflict |
Early April | Up to 145% (cumulative) | Matches sharp increases to 84–125% | Peak hostilities |
Mid-May | Truce: U.S. lowers to 30% | Lowers tariffs to 10% | Temporary calm |
Summer–Aug. | Truce extended after negotiations | Export relief, rare-earth issue remains | Pause — but strategic issues remain unresolved |