US-China Trade War 2025: Tariff Escalation and Global Economic Impact

Published on April 11, 2025

Listen to the Podcast

On the Brink of a Major Trade War: The Escalation of US-China Confrontation and Its Global Consequences

The world is once again on the threshold of a serious economic confrontation. The trade war between the world's two largest economies—the United States of America and the People's Republic of China—is experiencing a new wave of escalation, threatening to develop into a full-scale conflict with unpredictable consequences for the entire global economy.

As I explore in depth in my book Weaponized Economy: The Hidden History of Trade Wars and Their Impact on Global Politics, economic weapons have often proven more devastating than military conflicts throughout history. Today, we're witnessing this dangerous pattern repeat itself on a scale that threatens the entire global economic order.

It seemed recently that after some lull in trade relations following the signing of the first phase of the trade deal in 2020, the parties might find common ground. However, the introduction of new, unprecedentedly high duties by the US and Beijing's immediate response indicate deepening contradictions and unwillingness of both sides to make concessions.

To understand the seriousness of the situation and possible development scenarios, it is necessary to look at the history of trade and economic relations between the US and China, as well as analyze the factors pushing both countries toward further escalation of the conflict.

Origins of the Trade Confrontation

Trade relations between the US and China have a long history, marked by periods of growth and mutual benefit as well as moments of tension. After the establishment of diplomatic relations in 1979 and the introduction of normal trade relations status in 1980, trade turnover between the countries began to grow rapidly. China's accession to the World Trade Organization (WTO) in 2001 was an important milestone that contributed to the further integration of the Chinese economy into the world. By 2006, China had become the second largest trading partner of the US.

However, during the 2016 election campaign, Donald Trump repeatedly criticized China's trade policy, accusing the country of unfair practices and exploiting the American economy. After coming to power, the Trump administration began to take concrete steps aimed at changing the existing state of affairs.

The first serious tariffs were imposed in 2018 on imports of solar panels and washing machines. Subsequently, citing an investigation into intellectual property theft and discriminatory practices by China that harm American trade, the US published a list of more than 1,300 Chinese goods on which it planned to impose 25% duties. China did not stand aside and introduced retaliatory tariffs on imports of American products.

This exchange of blows initiated a trade war that continued with varying success until 2020. Despite reaching a partial trade agreement in January 2020, most of the imposed duties remained in force. Moreover, with the arrival of a new administration in the US, although the rhetoric somewhat softened, fundamental problems in trade relations were not resolved.

New Wave of Escalation in 2025

In 2025, the trade war between the US and China erupted with renewed vigor. The beginning of Donald Trump's second presidency was marked by a sharp increase in customs duties on all goods from China. Initially, the duty was set at 10% in February, then increased to 20% in March, and by April 10 reached an unprecedented 145%.

China's reaction followed immediately. In response to US actions, Beijing announced an increase in import duties on American goods to 125%. The Chinese Ministry of Finance's statement emphasized that these measures were a response to the "disrespect that China shows to world markets." The Chinese side accuses the US of "starting a trade war," violating international trade rules, and contradicting common sense.

Moreover, China stated its intention to ignore further tariff increases from the US, considering them an economically meaningless "numbers game" and intimidation tool.

Factors Contributing to Further Escalation

Many factors fuel the current escalation of the trade war. Among the key ones we can highlight:

• Mutual tariff increases and retaliatory measures. As the conflict chronology shows, each increase in tariffs by one side inevitably leads to retaliatory steps by the other. This cyclical process becomes a powerful driver of escalation, as neither side wishes to appear weak or yield to pressure.
• Different interpretations of the causes of the conflict and the actions of the other side. The US accuses China of "fleecing the US and other countries," using "discriminatory practices that harm American trade," and stealing intellectual property. China, in turn, sees US actions as a manifestation of protectionism, violation of free trade principles, and an attempt to contain the PRC's economic growth. Such a fundamental divergence in views makes it difficult to find a compromise.
• Geopolitical rivalry. The trade war is just one aspect of a broader geopolitical confrontation between the US and China for influence in the world. In this context, economic measures become tools for achieving strategic goals, and concessions in trade may be perceived as a defeat in a larger struggle.
• Domestic political motives. In both the US and China, domestic politics play an important role in shaping trade strategy. A tough stance toward trading partners can find support among voters and strengthen leaders' positions. Unwillingness to "show weakness" to the domestic audience becomes an additional obstacle to compromise.
• Economic leverage and vulnerabilities. Both countries possess certain economic leverage. China controls a significant portion of the world's production and processing of rare earth metals, making many sectors of the global economy dependent on supplies from the PRC. The US, in turn, is a large market for Chinese goods, and increased duties can significantly impact Chinese exporters. The calculation that the other side will be more vulnerable may push toward further escalation.
• Use of non-tariff measures. In addition to duties, countries can use other pressure tools, such as restrictions on access to technologies, tightening of customs procedures, introduction of quotas, and other non-tariff barriers. These measures can have no less significant impact on trade flows and also contribute to escalation.
• Risks of world trade fragmentation. Deepening of the trade war between the US and China carries the risk of world trade fragmentation along geopolitical lines. WTO Director-General Ngozi Okonjo-Iweala warns that dividing the world economy into two blocs could lead to a long-term reduction in global real GDP by almost 7%.

Potential Consequences of Escalation

Further escalation of the trade war between the US and China is fraught with serious negative consequences for both countries and for the world economy as a whole:

• Price increases for consumers. Higher duties on imported goods inevitably lead to price increases for end consumers in the US. Analysts predict a significant increase in the cost of electronics, automobiles, household appliances, clothing, and footwear.
• Increased costs for businesses. American companies dependent on Chinese components and materials will face increased production costs. Moving production from China to the US or other countries involves significant time and financial costs.
• Reduced competitiveness. Higher prices for imported goods may negatively affect the competitiveness of American companies both in domestic and foreign markets.
• Impact on Chinese exporters. Increased American duties will lead to reduced demand for Chinese goods in the US, which may cause a reduction in production volumes and profitability of export-oriented enterprises in China. This, in turn, may increase economic pressure on the PRC, which is already facing internal economic problems.
• Negative impact on the US agricultural sector. China is a major buyer of American agricultural products such as soybeans and corn. Reduced purchases by the PRC could deal a serious blow to American farmers.
• Shock to global markets. China's restriction of access to rare earth metals could shock global markets and lead to price increases for electronics and slowed production in strategic industries.
• Risk of transition to other forms of confrontation. Some experts do not rule out that further escalation of the trade war may increase the risk of transition to other forms of confrontation, including military.

Prospects for Settlement

At present, the prospects for a quick settlement of the trade war between the US and China look bleak. Neither side demonstrates readiness for unilateral concessions, fearing to "show weakness." Chinese President Xi Jinping calls on the European Union to unite against Trump's tariff policy, indicating China's desire to create a broader front of confrontation.

At the same time, awareness of the negative consequences of the trade war for both countries may ultimately push leaders to seek compromise solutions. However, given the depth of contradictions and the geopolitical context, this process may be long and painful.

According to some analysts, China may try to use its economic leverage, for example, by limiting access to rare earth metals or increasing pressure on American companies operating in the Chinese market. In turn, the US may continue to increase tariff pressure and introduce new restrictions.

The outcome of this trade war remains uncertain. One thing is clear for sure: further escalation will not benefit either side and will have serious negative consequences for the entire world economy. It is extremely important for the international community to join efforts to preserve an open and rules-based trading system and to promote dialogue between the US and China to prevent sliding into a full-scale economic war.

Tariff War Escalation in 2025

The trade war between the US and China, which began back in 2018 during Donald Trump's first presidency, is experiencing a new aggravation in 2025 with his return to power. According to Wikipedia, from February 1, 2025, the US imposed 10% duties on all goods from China, and by April 10, these duties grew to 145%. In response, China also raised duties on imports from the US to 84% by April 10. Notably, in February and March 2025, tariffs were also introduced and increased from both sides on various categories of goods.

A new round of escalation occurred, according to news sources from April 11, 2025, when China announced a further increase in import duties on goods from the US to 125%. Previously, these duties were 84%. The Chinese Ministry of Finance emphasized that this was a response to the increase in duties from the US, which reached 145% (base tariff of 20% plus 125%). US President Donald Trump explained his actions by "the disrespect that China shows to world markets." In his post on Truth Social, he expressed hope that China would understand that "fleecing the US and other countries is no longer possible and unacceptable."

China, in turn, accuses the US of starting a trade war, violating international trade rules and basic laws of economics, calling the constant increase in tariffs a "farce." The Chinese Ministry of Finance stated that "it has become a joke," referring to Washington's excessively high tariffs used as an intimidation and coercion tool.

As I detail in my book Weaponized Economy: The Hidden History of Trade Wars and Their Impact on Global Politics, these patterns of economic weaponization follow historical precedents that have repeatedly escalated beyond their initiators' control, often with devastating consequences for global stability.

In connection with the new duties imposed by China, discussions appeared on Reddit about possible consequences for the market. One user jokingly expressed hope for profit from their put options on Tesla (TSLA) shares. Another user suggested that the absence of a quick resolution to the trade conflict could become a "free pass" for an "invasion of Taiwan." There were also suggestions about further price increases, for example, up to 165%, which would make the Temu website "damn luxurious."

Chinese President Xi Jinping called on the European Union for joint action against US protectionist policies. Speaking in Beijing before Spanish Prime Minister Pedro Sanchez, Xi Jinping stated that China and the EU should act as a united front to protect their legitimate rights and interests, as well as "international justice." He emphasized that there would be no winners in a tariff war, and the desire to go against the world would lead to isolation. Sanchez, for his part, called for a more "balanced approach" in relations between the EU and China. The European Union previously welcomed Trump's decision to postpone the introduction of increased duties for most countries (except China) and declared readiness for both negotiations with the US and retaliatory measures if duties come into force. US Treasury Secretary Scott Bessent, however, cautioned the EU against taking China's side, stating that it would be equivalent to "suicide."

The introduction of duties by the US has already led to a fall in indices on world markets, a decline in the dollar, and concerns about a global recession. Trump explains his actions by the need to protect US interests and American companies.

Economic Consequences of the Tariff War

The increase in duties between the US and China will undoubtedly have a negative impact on both countries. American consumers will face price increases for electronics, automobiles, and household appliances. Companies using Chinese components will be forced to increase costs, which will likely lead to further price increases for end consumers. Analysts predict a significant increase in the cost of goods such as Apple phones, while small goods and components that are unprofitable to produce in the US may double in price. Prices for clothing and footwear will also rise.

Chinese manufacturers, especially in export-oriented regions, may face reduced production volumes and profitability, which will increase pressure on the PRC economy, which is already experiencing structural slowdown, debt problems, and weak domestic demand. There are reports of growing protest sentiments and the stoppage of some enterprises in China.

One of China's key leverage points is rare earth metals, in the production and processing of which the country occupies a dominant position. Limiting access to these critically important resources could shock global markets, increase prices for electronics, and slow down production in strategic US industries.

The American agricultural sector will also be hit, as China is the largest buyer of American soybeans, corn, meat, and cotton. Reduced purchases by China could lead to serious problems for many farms in the US, especially in states traditionally supporting Trump and the Republican Party. China has the ability to reorient agricultural imports to other countries, such as South America, Russia, and Ukraine. As a result, American farmers may incur losses and increase pressure on the government with demands for compensation.

American multinational corporations such as Apple, Tesla, Boeing, Nike, and Starbucks have deep integration with the Chinese market both in terms of production and sales. They will have to balance between the needs of global business and political pressure in the US. Moving production from China to the US is associated with significant time and financial costs, as well as the problem of finding a skilled workforce. It is expected that in upcoming quarterly reports, companies may report a decrease in margin, profit, and sales due to the US-China trade confrontation.

According to some analysts, trade tensions between the US and China may lead to an 80% reduction in bilateral trade, which will have serious global economic consequences. WTO Director-General Ngozi Okonjo-Iweala emphasized the risks of world trade fragmentation along geopolitical lines, which could lead to a long-term reduction in global real GDP by almost 7%. She called for international cooperation to preserve an open trading system.

Historical Context and Long-term Consequences

The trade war between the US and China has its prehistory, including periods of trade embargo and subsequent normalization of trade relations. By 2017, trade turnover between the countries had reached significant volumes, with a substantial US trade balance deficit in favor of China.

The introduction of tariffs in 2018 and 2019 was almost fully reflected in the increase in prices for imported goods in the US, without leading to a significant replacement of Chinese imports with American products. The positive effect for US economic sectors sensitive to Chinese imports was offset by rising raw material prices and retaliatory duties. The trade war led to a deterioration in the welfare of American households and did not contribute to employment growth in the manufacturing sector. The goal of American companies returning production to the US was also not achieved. One of the notable results was the strengthening of intellectual property protection in China. The trade war also led to a slowdown in the growth of the PRC economy.

To bypass duties, Chinese companies began to move production to other Asian countries and Mexico.

There is a risk that economic confrontation between the US and China may develop into other forms of confrontation, including military. Both sides, both the US and China, are unwilling to demonstrate weakness, which makes it difficult to find a compromise and conclude an agreement. The world may enter a new stage of powerful confrontation affecting the entire global economy.

Reaction in the Stock Market and Cryptocurrencies

Against the background of the aggravation of the trade war, various speculations and sentiments arise in financial markets. The mention of put options on Tesla shares indicates that some investors expect a decrease in the value of companies closely associated with the Chinese market due to trade restrictions.

In addition, one source reports that MicroStrategy, known for its significant investments in bitcoin, acknowledged that by 2026 there may be a need to sell some of its BTC. This statement was made as part of risk disclosure and may be related to various factors, including general economic instability caused by the trade war, although a direct connection is not mentioned. Previously, the company stated its intention to never sell bitcoin.

Senator Adam Schiff announced a formal investigation to determine whether members of Donald Trump's administration received illegal profits from "today's stock market machinations." Although a direct connection to the trade war is not indicated, such investigations reflect political tension and suspicions of improper actions against the background of economic shocks. Commentators on Reddit expressed various opinions on this matter, some supporting the need for investigation and providing evidence to the public.

Thus, the escalation of the trade war between the US and China in 2025 represents a complex and multifaceted process with serious economic, political, and geopolitical consequences. The increase in tariffs to 125% by China in response to 145% duties from the US is evidence of further escalation of the conflict, which may lead to a significant reduction in bilateral trade, price increases, problems for various sectors of the economy, and increased global instability. China's call to the EU to unite against the US emphasizes the international dimension of this confrontation.

Frequently Asked Questions about the US-China Trade War

1. What are the main reasons for the aggravation of the trade war between the US and China in 2025?

The main reason is the continuation and strengthening of US protectionist policy, expressed in a significant increase in customs duties on imports of Chinese goods. US President Donald Trump explains these measures by "the disrespect that China shows to world markets" and the need to protect American economic interests. China, in turn, views US actions as starting a trade war and violating international trade rules, responding with a mirror increase in duties on American goods.

2. How much have the tariffs imposed by both sides increased?

By April 2025, the US had raised duties on Chinese imports to 145%. In response, China announced an increase in import duties on goods from the US to 125%, previously 84%. Both sides demonstrate readiness for further escalation, while China states that it will ignore further increases in duties from the US, considering that the market is no longer able to accept American goods at current prices.

3. What are the potential consequences of increased tariffs for the US economy?

Higher tariffs on Chinese goods may lead to price increases for imported goods in the US, which will affect consumers. In addition, China's retaliatory measures may hit American exporters, especially in the agricultural and pharmaceutical sectors. Some analysts fear a weakening of the dollar and rising interest rates due to possible sales of US Treasury bonds by other countries. There is also a risk of economic growth slowdown due to reduced trade and investment volumes.

4. How is the trade war affecting China?

For China, increased tariffs from the US mean a loss of competitiveness in one of the key export markets. This may lead to reduced production volumes, increased unemployment, and stronger protest sentiments. In response, China may reorient its imports to other countries (such as South America, Russia, Africa) and use leverage such as control over rare earth metal supplies, which could shock world markets and slow production in strategic US industries.

5. Is there a risk of global economic consequences from the trade war?

Yes, there is a significant risk of negative impact on the world economy. Reduced trade between the world's two largest economies may lead to fragmentation of world trade, disruption of global supply chains, and a slowdown in world economic growth. The WTO Director-General warns of substantial risks of further escalation, which could particularly hard hit the least developed countries.

6. What is the position of other countries, such as the European Union, regarding the US-China trade confrontation?

The European Union expresses concern about the escalation of the trade war and calls for a multilateral approach to resolving trade disputes. China, in turn, calls on the EU to take joint action against US protectionist policies to protect its interests and "international justice." However, the US Treasury Secretary cautions the EU against supporting China, calling it "suicide."

7. Could the trade war lead to a broader geopolitical conflict?

Some analysts do not rule out that further aggravation of the trade war could lead to a transition to other forms of confrontation, including military, especially if neither side wants to show weakness and make concessions. Control over resources, food security, and technological dominance are becoming new fields of geo-economic struggle, which increases geopolitical tension.

8. How is the situation with MicroStrategy and bitcoin related to the trade war?

Although the direct connection is not obvious from the presented sources, the situation with MicroStrategy, which may be forced to sell its significant bitcoin reserves by 2026 due to financial obligations, may indirectly reflect the general economic instability and uncertainty in markets, exacerbated by the trade war. Tariffs and countermeasures may affect the financial condition of companies and their ability to service debts, which, in turn, may affect their investment strategies, including ownership of volatile assets such as bitcoin. In addition, the mention that Trump promised bitcoin "made in America" and then "spoiled it with tariffs" indicates that trade policy may have unforeseen effects on various sectors of the economy and assets.

Share This Article

Available Now