The China-US Tariff Trade War: Background, Impact and Outlook
In recent years, the China-US tariff trade war has become a highly瞩目的 focal event in the global economic arena, exerting a profound influence on the economic landscapes of both countries and even the world. This trade dispute not only concerns economic interests but also involves complex games across multiple dimensions such as politics, technology, and geopolitical strategy. A thorough analysis of the China-US tariff trade war helps us to more clearly understand its essence, impact, and future trajectory.
I. The Development Process of the Trade War
The China-US tariff trade war has gradually escalated since 2017, experiencing several rounds of confrontations. From 2017 to 2020, it was the initial stage of the trade war. The United States launched the "Section 301 Investigation" against China, and on the grounds of intellectual property rights and technology transfer issues, imposed tariffs on Chinese goods. The US took the lead in imposing a 25% tariff on US$34 billion worth of Chinese goods, covering areas such as industrial machinery and electronic equipment. China promptly retaliated with equal measures on the same day, imposing tariffs on US agricultural products, automobiles, and other goods. Subsequently, the US continuously increased the pressure, imposing a 10% tariff on US$200 billion worth of Chinese goods and raising it to 25% in May 2019. China, in response, imposed tariffs ranging from 5% to 25% on US$60 billion worth of US goods. The US also announced a 10% tariff on the remaining US$300 billion worth of Chinese goods, while China countered with tariffs on US$75 billion worth of US goods.
From 2021 to 2023, it was a stage of policy continuation and partial adjustment. The Biden administration maintained the 25% tariffs on China imposed during the Trump era but exempted some consumer goods (such as bicycles and home appliances) from tariffs to ease domestic inflation pressure. China responded to the US measures by filing lawsuits at the WTO and sanctioning US enterprises (such as Lockheed Martin).
In 2024, there was an escalation of tariffs in the technology field. Based on the review of the "Section 301 Clause," the US imposed tariffs ranging from 25% to 30% on strategic industries such as electric vehicles, lithium batteries, photovoltaic cells, and semiconductors, attempting to curb China's development momentum in emerging technology industries. In response, China accelerated the process of technological self-reliance and restricted the export of rare earths.
Entering 2025, the tariff game between the two sides has entered a stage of all-round confrontation and extreme game. Trump signed an executive order imposing a 10% tariff on all Chinese goods exported to the US (covering US$500 billion). China immediately retaliated by imposing tariffs on US agricultural products and sanctioning 10 US enterprises. Subsequently, the US announced a "reciprocal tariff" of 34% on China, and China announced a reciprocal 34% tariff the next day. The US further threatened to increase the tariff rate to 104%, and China announced a countermeasure to raise it to 84% on April 9. The trade between the two sides was almost at a standstill, and the global supply chain was also greatly impacted.
II. Reasons for the Outbreak of the Trade War
1. Economic Aspects
The United States has long had a trade deficit with China. In 2024, the US trade deficit with China still reached as high as US$279 billion. The US believes that its manufacturing hollowing out and the loss of jobs are related to the trade deficit and attempts to reverse this situation by imposing tariffs to protect domestic industries. In addition, China has been rising steadily in the global industrial chain division of labor. In some fields such as new energy vehicles (with a global market share of 60%) and semiconductors (with a self-sufficiency rate of 45%), it poses a threat to the US's technological monopoly position. The US hopes to maintain its economic hegemony and high-end position in the global industrial chain through this trade war.
2. Political Aspects
The workers and farmers in the Rust Belt are an important voter group in the United States. They have lost their jobs due to globalization and demand that the government protect domestic industries. In order to fulfill the "America First" promise and gain the support of this part of the voters, the US government has adopted trade protection measures. At the same time, the US is facing problems such as a soaring inflation rate (which has reached 12.4%) and an increased risk of national debt default (rising to 35%). The public's dissatisfaction with the government is intensifying, and taking a tough stance against China has become an effective tool to divert the focus of domestic social contradictions.
3. Geopolitical Strategy Aspects
With China's rapid development in the technology field, such as Huawei's breakthrough in 5-nanometer chip technology and BYD overtaking Tesla, the US has realized that it cannot stop China's innovation relying solely on market rules. Therefore, it attempts to block China's technology acquisition channels through tariffs and achieve technological decoupling. In addition, the US believes that the multilateral system of the WTO is unfavorable to it and attempts to force its allies to take sides through unilateral tariffs, rebuilding a trade order centered around the US and curbing China's influence on the international economic stage.
III. The Impact of the Trade War on Both Sides
(I) Impact on China
1. Export Trade
China's exports to the US account for a certain proportion of its total exports. The trade war has put pressure on the scale of exports. If the US imposes high tariffs, China's exports to the US will decline, directly dragging down China's total exports and thus affecting the GDP growth rate. According to relevant calculations, if the US imposes a 54% tariff (including the previous 20%), China's exports to the US will decline by 31.5% - 33.5%, directly dragging down China's total exports by about 4.6 - 4.9 percentage points. Export-related enterprises will receive fewer orders, and some enterprises are facing the risks of overcapacity, declining profits, and even closure, especially the mechanical and electrical and high-tech industries and labor-intensive industries are more severely impacted. For example, mechanical and electrical products account for as high as 40% of China's exports to the US. If the US imposes a 50% tariff on chips below 14 nanometers, domestic semiconductor enterprises will face the risk of losing orders. Labor-intensive industries such as clothing and furniture are more than 10% dependent on the US market. After the imposition of tariffs, the gross profit margin of some enterprises may turn negative.
2. Industrial Structure
The trade war has also forced China to accelerate the adjustment and upgrading of its industrial structure. On the one hand, it encourages enterprises to increase investment in technology research and development and innovation, accelerate the resolution of "bottleneck" technologies, and promote the process of domestic substitution in key industries such as semiconductors, improving the ability of industrial self-control. For example, the State Grid has promoted the de-Americanization of the supply chain, and the localization rate of key equipment has reached 100%. On the other hand, it promotes enterprises to explore new markets, reduce their dependence on the US market, and turn to markets such as countries along the Belt and Road, ASEAN, and the EU, achieving market diversification. Chinese photovoltaic enterprises have bypassed tariff barriers through factories in Southeast Asia, and the export of power grid equipment has shifted to Africa (with a growth rate of 40.6%) and Europe (with a growth rate of 11.8%).
3. The People's Livelihood Field
The prices of medical equipment, auto parts, and other goods imported from the US may rise, and some drugs (such as metformin) may face the risk of supply interruption, pushing up the living costs of residents. However, in the long run, with domestic industrial upgrading and market diversification, these impacts are expected to be alleviated.
(II) Impact on the United States
1. Prices and People's Livelihood
The United States imports a large number of inexpensive and high-quality goods from China. After the imposition of tariffs, the prices of these goods have risen, directly leading to an increase in the domestic price level in the US and加剧 inflation pressure. The US has been deeply trapped in an "egg shortage" due to high inflation and supply chain disruptions. The price of a dozen eggs has soared to US$5.9 (about 42 yuan), and some supermarkets have imposed purchase limits, and there have even been egg theft incidents. Yale University predicts that if the world imposes retaliatory tariffs on the US, each American household will lose an average of US$3,800 per year, and low-income groups will bear the brunt. The living costs of the public have increased significantly, and the quality of life has declined.
2. Enterprise Operation
American enterprises, especially those that rely on imported parts and raw materials from China, have seen a significant increase in production costs, and their profit margins have been compressed. Tesla, due to its dependence on imported parts, has seen a sharp increase in costs due to tariffs. Musk once pleaded with Trump but failed and bluntly stated that "tariffs have cost the company hundreds of billions of dollars." Many American enterprises are facing the risk of supply chain disruption and have to find new suppliers or adjust their supply chain layouts. However, this process is not only costly but also faces many uncertainties.
3. Economic Growth
The trade war has hindered the economic recovery and growth of the United States. High tariffs have led to an increase in US import costs, and exports have also been affected by the countermeasures of other countries. The problem of the trade deficit has not been effectively solved but may even deteriorate further. At the same time, the willingness of enterprises to invest has decreased, and consumer confidence has been frustrated, forming a drag on the overall economic growth of the United States. Wall Street giants have warned that tariffs may trigger an economic recession in the US.
IV. China's Coping Strategies and Future Outlook
In the face of the tariff trade war initiated by the United States, China has adopted a series of firm, powerful, and intelligent coping strategies. On the one hand, China has resolutely taken reciprocal countermeasures. According to the situation of the tariffs imposed by the US, it has correspondingly increased the tariffs on US goods to safeguard its legitimate rights and interests and national dignity. At the same time, it has included some US entities in the export control list and the unreliable entity list, restricting their trade and investment activities in China and precisely hitting relevant US industries. For example, 12 US entities, including American Photonics Corporation and BRINC Drone Company, have been included in the export control list, and the export of dual-use items to them is prohibited; 6 US enterprises that participated in arms sales to Taiwan have been included in the unreliable entity list.
On the other hand, China has actively promoted economic structure adjustment and transformation and upgrading, increased investment in scientific and technological innovation, improved its independent innovation ability, reduced its dependence on foreign technologies, and accelerated the realization of domestic substitution of key technologies. At the same time, it has vigorously expanded the domestic market, driving economic growth by expanding domestic demand and enhancing the resilience and stability of economic development. In 2025, China launched fiscal expansion, expanding the deficit rate to 4%, and the new debt scale reached 11.86 trillion yuan, focusing on supporting areas such as consumption subsidies and the renovation of urban villages to cushion the decline in external demand. In addition, China has actively strengthened economic and trade cooperation with other countries and regions in the world, promoted the Belt and Road Initiative, deepened trade exchanges with ASEAN, the EU, and other regions, and built a diversified trade pattern to reduce the risks brought about by the trade war. In 2024, China's exports to ASEAN increased by 12%, and its proportion in total exports rose to 18%. ASEAN has become an important trading partner of China.
Looking ahead, although the China-US tariff trade war has brought huge losses to both sides, it has also prompted the two countries to re-examine their economic structures and trade policies. There are no real winners in a trade war, and win-win cooperation is the mainstream of the development of the times. With the deepening of global economic integration, as the world's two largest economies, China and the US are highly interdependent and have broad cooperation spaces in many fields. In the future, the two sides should adhere to the principles of equality, mutual benefit, and win-win results, resolve trade disputes through dialogue and negotiation, and promote the bilateral trade relations back on track. China will continue to adhere to reform and opening up, continuously enhance its economic strength and international competitiveness, play a more active and important role on the global economic stage, and contribute China's strength to promoting the construction of a community with a shared future for mankind.