The trade war between the United States China and is heating up again. President Donald Trump has imposed new tariffs on Chinese goods and China has responded with counter measures. This economic conflict is not new and with the passage of time it will become more intense. Because both states are targeting each other to damage their economies and the global market.
On February 1, President Trump announced tariffs on China, Canada and Mexico. The reason? He claimed these countries were not doing enough to stop illegal drugs from entering the U.S. However, Canada and Mexico have successfully negotiated with the U.S. government to delay the new tariffs for 30 days but China did not get the same deal.
In fact on February 4, all Chinese imports to the U.S. faced a new 10% tariff. The Chinese government responded with tariffs on U.S. coal, liquefied natural gas, crude oil and other products. It also took other measures, such as adding U.S. companies to its “Unreliable Entities List.” Beijing also tightened control over exports of rare earth metals, which are important for technology production.
The U.S. and China are the world’s two biggest economies. When they fight, the whole world feels the impact. In the first trade war during Trump’s presidency, both countries lost billions of dollars. This time, the damage could be worse. The U.S. hopes to pressure China into making trade concessions. Trump has a history of using tariffs as a negotiation tool. However, China has learned from past trade wars. It is now using targeted countermeasures to hit American industries that rely on Chinese markets. China has fewer U.S. imports to tax because it exports much more to the U.S. than it imports.
Instead of matching tariffs dollar for dollar, China is using different tactics: China has already targeted U.S. companies like Illumina and PVH Corp. It can further target the major firms like Tesla and Apple which depend on Chinese customers. China has already delayed U.S. farm products like soybeans and meat and they can block more goods. This would put pressure on American businesses.
China controls rare earth metals, which are needed for electronics and military equipment. If China restricts these exports, U.S. manufacturers could struggle to get the supplies they need. China may also weaken its currency in order to make Chinese goods more affordable. If Trump raises tariffs, China could devalue its currency. This would make U.S. exports more expensive and less competitive.
While Trump wants to show strength against China, his tariffs also damage American businesses and consumers. When tariffs go up, the price of Chinese goods increases. Many American companies rely on Chinese imports and higher costs mean they must either raise prices or reduce profits. For example, the automotive and technology industries are especially vulnerable. Tesla depends on its factory in Shanghai to produce cars efficiently. If China restricts Tesla’s operations, the company could suffer major losses. Apple also relies on China for both manufacturing and sales.
Any restrictions on its supply chain could delay new product releases and hurt revenue. The U.S. farming industry is also at risk. In previous trade disputes, China cut its soybean imports from American farmers, turning instead to Brazil. This time, China may expand restrictions on American agricultural products, pushing U.S. farmers into another crisis.
This trade war does not only affect China and the U.S. Many other countries depend on stable trade between the two superpowers. Supply chains are deeply connected. If China blocks certain materials or the U.S. imposes higher tariffs, businesses in Europe, Japan and Southeast Asia could suffer disruptions. Markets have already reacted negatively to the trade war. Stock prices for companies that rely on Chinese trade have dropped. Investors fear that prolonged tensions could slow global economic growth.
Trump has threatened to increase tariffs further, possibly up to 60% on Chinese imports. If this happens, China will likely escalate its response. It could increase its own tariffs, restrict more American companies, or act against U.S. investments in China. Despite the tough talk, neither country wants a full economic collapse. There is still a chance for negotiations. In previous trade wars, Trump used tariffs as a pressure tool but later reached agreements. If both sides come to the table, they may find a way to reduce tensions, otherwise this trade war will continue for years.
The U.S. and China, both countries have weapons (tariffs, restrictions and economic pressure) to fight this trade war, but neither can win outright without serious damage. Instead of escalating conflict, the U.S. and China should find a path toward economic cooperation. The sustainability of world’s economy depends on the cooperation between these two major powers in order to prevent further economic damage.
