The trade war between the world’s two largest economies shows no signs of slowing, as tensions between the United States and China reach new heights. US President Donald Trump has threatened to nearly double tariffs on Chinese goods, potentially imposing a staggering 104% tax on most imports from China, escalating the ongoing conflict.
The looming tariffs, which target a broad range of Chinese products from smartphones and computers to lithium-ion batteries, toys, and video game consoles, come as a direct response to China’s own 34% tariff retaliation. Trump’s threat to raise the additional tariffs by 50% if China does not back down could have far-reaching consequences, including significant price hikes for consumers and businesses alike.
Experts suggest that neither side is willing to back down. Alfredo Montufar-Helu, a senior advisor to the China Center at The Conference Board, noted that China is unlikely to capitulate. “It would be a mistake to think that China will back off and remove tariffs unilaterally,” he said. “This impasse is likely to lead to long-term economic pain for both sides.”
The global market has already begun feeling the impact, with Asian stocks suffering their worst drop in decades. Although there was a slight recovery on Tuesday, the rapid escalation of tariffs has left governments, businesses, and investors scrambling to adjust to the shifting global landscape.
China’s response has been swift, with retaliatory tariffs and measures such as allowing the yuan to weaken, making Chinese exports more competitive. Additionally, state-linked enterprises have been purchasing stocks in an effort to stabilize the market. However, the trade conflict shows no sign of resolution, and the risk of further escalation remains high.
Mary Lovely, a US-China trade expert at the Peterson Institute, emphasized that the current situation has become a test of endurance. “We are seeing a game of who can bear more pain,” she said. Despite China’s slowing economy, she believes the country is willing to endure the economic strain rather than capitulate to what it views as US aggression.
The tariffs are particularly concerning for China, where exports have been a significant driver of economic growth. The US has been one of China’s largest markets, importing goods worth $438 billion in 2024, while US exports to China totaled $143 billion. The trade deficit with China stood at $295 billion. The impact of the tariffs on China’s crucial export sector could exacerbate existing economic struggles, including a property market crisis and rising unemployment.
Both countries are deeply intertwined economically, with significant investments and trade flows beyond physical goods. Deborah Elms, Head of Trade Policy at the Hinrich Foundation, warned that while tariffs may target physical goods, other forms of retaliation, such as digital trade and data restrictions, are likely.
The world is watching closely, as the US-China standoff could lead to shifts in global trade patterns. Chinese exports that are shut out of the US market may find new markets in Southeast Asia, but these regions are also grappling with their own tariff issues.
As the deadline for the new tariffs approaches, uncertainty remains high. Roland Rajah, lead economist at the Lowy Institute, believes that China has a range of retaliatory options, including further currency devaluation and actions against US firms operating in China. However, the true direction of the trade war is still unclear, with many experts questioning whether negotiations between the two nations will take place or if further escalation is inevitable.
While some hope for private talks, others, like Elms, remain skeptical of Trump’s belief that the US market’s importance will ultimately force China to relent. “How will this end? No one knows,” she said, voicing concerns about the rapid escalation and the high risks involved. As the trade war continues, the future of global trade hangs in the balance.
