In 2025, the trade war between the United States and China, far from being a closed chapter, has riskily escalated.
Under the rhetoric of protecting national industry and jobs, the Trump administration has driven a protectionism that acts as a hidden tax for American workers and consumers.
A trade war is, in essence, an economic dispute based on reciprocal tariffs that limit free trade.
Although its defenders present it as a legitimate response to unfair trade practices and an effort to balance the trade deficit, the reality is that this conflict is a zero-sum game where the hardest hit are the middle class, small farmers, and global economic stability.
This confrontation is not an economic solution, but a political escalation with already palpable damages.
This in-depth article addresses what a trade war is, how it works, and what its impacts are for the US and global economy.
Anatomy of the Conflict: From Intellectual Property Theft to Total Retaliation
The conflict began in 2018 with accusations against China for intellectual property theft, but has since evolved dramatically.
After a partial truce in 2020, the confrontation intensified in 2024 when the Biden administration imposed 100% tariffs on electric vehicles and 50% tariffs on strategic Chinese technologies, such as semiconductors and solar cells.
This strategy, based on long-term economic interests, national security, and internal political calculations, has affected approximately $18 billion in Chinese imports.
The administration justified the increases based on Section 301 of the Trade Act of 1974, with clear objectives:
- Protect and revitalize domestic industrial policy.
- Counteract unfair foreign trade practices.
- Strengthen national security and supply chain resilience.
- Respond to internal political motivations, including electoral outcomes.
In 2025, with the return of Trump to the presidency, the escalation deepened with the threat and imposition of additional tariffs of up to 100% on all Chinese products.
This new stage introduces strategic and sectoral weapons, especially:
- The Port War: Tension spread to the maritime sector with the imposition of reciprocal port fees between the two countries. This “tit-for-tat” move not only makes products more expensive but also threatens to distort global cargo flows, affecting logistics and supply chains worldwide.
- The Rare Earths Weapon: China’s most strategic response has been to reinforce control over rare earths, critical minerals for high technology (electric vehicles, wind turbines, semiconductors). By restricting their export, China introduces a risk of shortage and increased cost for vital components, highlighting the technological vulnerability of the United States and raising the cost of the energy transition.
- Immediate Impact: Stock Market Panic and Cryptocurrency Plunge Due to Tariff Threat
- The intensification of tariffs provoked extreme volatility in financial markets. The Dow Jones plunged more than 900 points in a single session, while the cryptocurrency market lost over $200 billion. The price of oil also fell, reflecting growing global concern about an economic slowdown.
- Beyond finance, this escalation is driving a forced restructuring of global supply chains. Key sectors like electronics face chip shortages and cost increases, while industries like furniture and textiles are accelerating the relocation of their manufacturing out of China, benefiting countries like Vietnam.
- Effects on Inflation, Logistics, and Strategic Supply Risks
- The imposition of reciprocal port fees makes global maritime logistics more expensive, affecting the trade of essential goods.
- American importers, including retail companies like Amazon and Target, absorbed most of these costs, even though they were expected to be passed on to the end consumer. This generates direct inflationary pressure on consumer prices.
- The Consumer Pays the Bill: Tariff-Induced Inflation
- Contrary to political rhetoric, economic evidence shows that tariffs are not paid by the Chinese exporter, but are largely absorbed by US importers (in their margins) and, ultimately, passed on to the end consumer. It is a potential trap:
- Inflation and Price Pressure: Tariffs are exerting upward pressure on prices, aggravating inflation in the local economy. The IMF has already indicated that this situation would weaken growth and keep inflation high, eroding the purchasing power of the working class. The new 100% tariff on China “clouds Christmas spending forecasts,” as price increases in electronics, furniture, and toys will be hard to absorb.
- Agricultural Crisis: The Soybean Example: The case of soybean farmers in the US Midwest is the most painful collateral damage. China, which was their largest buyer, has suspended orders. Prices have fallen 40% and farm bankruptcies have surged nearly 50% compared to 2024. Chinese retaliatory tariffs have made American soybeans “excessively more expensive” than South American soybeans. The government’s promise to use tariff revenue to “help” these producers is nothing more than a costly cure for a self-inflicted wound.
- Panic and Uncertainty: The threat of new massive tariffs caused a plunge of over 900 points in the Dow Jones and a loss of over $200 billion in value in the crypto market. This volatility underscores that the confrontation does not generate confidence or stability, but a risk of trade-driven recession.
- China Redefines Its Strategy: Shift and Expansion of South-South Trade
- Faced with disruption, manufacturing production is migrating out of China to other Asian countries.
- For example, shipments of Vietnamese furniture to the US increased by 48%. But China is not remaining static and is expanding its focus towards Africa, Southeast Asia, and Latin America, strengthening an emerging South-South trade alliance.
Faced with disruption, manufacturing production is migrating out of China to other Asian countries.
For example, shipments of Vietnamese furniture to the US increased by 48%. But China is not remaining static and is expanding its focus towards Africa, Southeast Asia, and Latin America, strengthening an emerging South-South trade alliance.
This positions China as a fundamental partner for emerging countries and challenges American economic dominance globally.
On the other hand, while the US economy suffers from induced inflation, the IMF warns of a possible economic bubble in the boom of artificial intelligence (AI) investments, comparable to the dot-com bubble of the past decade, increasing the country’s vulnerability.
The Failure of Protectionist Policy: A Crisis with No Winners
The 2025 trade war has proven to be a political and economic failure. It has not generated the promised benefits, but rather an increase in costs for the American consumer, severe harm to farmers, and danger to global economic stability.
The real solution does not lie in isolationist protectionism or unilaterally punishing China with punitive tariffs.
Fair, regulated, and sustainable trade is required, one that protects labor rights, environmental standards, and global public health.
Only then can a more equitable and stable global trading system be rebuilt.
