The U.S.-China trade war has intensified, with both nations imposing escalating tariffs that are disrupting global markets and supply chains. President Donald Trump has threatened an additional 50% tariff on Chinese imports unless China retracts its recent 34% tariff increase on U.S. goods by April 8, potentially raising total U.S. tariffs on Chinese products to 104%. In response, China has vowed to “fight to the end,” implementing its own tariffs and export bans on critical materials.
These developments have led to significant volatility in global financial markets. Major indices have experienced sharp declines amid fears of a deepening trade conflict. Specific sectors, particularly technology and manufacturing, are feeling the strain. For instance, semiconductor companies like Qualcomm, Intel, and Micron Technology face disruptions due to China’s control over essential raw materials.
The energy sector is also affected. China’s tariffs on U.S. crude oil and liquefied natural gas are prompting Chinese importers to seek alternative suppliers, potentially reshaping global energy trade flows.
In financial markets, the SPDR S&P 500 ETF Trust (SPY) is trading at $520.68, reflecting recent market volatility. The iShares China Large-Cap ETF (FXI) stands at $30.825, indicating investor concerns over Chinese equities. Companies like Alibaba Group Holding Ltd (BABA) are trading at $104.26, down 1.62% from the previous close, while Apple Inc (AAPL) is at $188.08, up 3.65%.
Analysts warn that prolonged tensions could lead to higher inflation and reduced global GDP growth. The situation remains fluid, with potential for further escalation or negotiation in the coming weeks.
The trade conflict between the United States and China has entered a new and more dangerous phase. On the surface, the story appears familiar — Washington imposed new tariffs; Beijing retaliated. But underneath this cycle of action and reaction lies a far more complex struggle, one that extends beyond simple trade imbalances. This is no longer just a tariff war — it is a systemic contest for technological dominance, supply chain control, and long-term strategic leverage.
In early April 2025, the US government imposed a sweeping 10 per cent tariff on all Chinese imports — a dramatic escalation that far exceeds the selective tariffs seen in the first phase of the trade war back in 2018. China’s response was swift but different this time. It hit US energy exports — imposing a 15 per cent tariff on American coal and liquefied natural gas (LNG), alongside a 10 per cent tariff on US crude oil, agricultural machinery, and large-engine vehicles.
But critically, China’s retaliation didn’t stop at tariffs.
Instead, Beijing signaled that it is playing a far broader game.
China announced several non-tariff measures that marked a significant evolution in its economic playbook:
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Launching an anti-monopoly investigation into Google.
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Adding US companies PVH (owner of brands like Calvin Klein and Tommy Hilfiger) and biotech giant Illumina to its Unreliable Entity List — a blacklist that can severely restrict a company’s operations in China.
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Tightening export controls on rare metals essential to defence, semiconductors, and clean energy technologies.
These actions show that Beijing has learned hard lessons from the 2018-2020 trade war. Back then, its retaliation was largely reciprocal: tariffs for tariffs. But this approach had clear limits. China’s vast trade surplus with the US — roughly $300 billion — meant it imported far less from America than vice versa. This made dollar-for-dollar tariff retaliation impossible.
Moreover, tariffs on US agricultural products or energy sometimes hurt Chinese businesses and consumers more than US producers. In effect, tariffs alone were a blunt tool.
This time is different.
Beijing’s new strategy reflects a broader evolution in Chinese policy thinking. Confronted by US tech bans on Huawei, ZTE, and later semiconductor export controls, China realized it needed a far more diversified set of economic tools.
China’s leadership — especially under Xi Jinping — has invested heavily in building what it calls economic statecraft. This means integrating trade policy, regulatory pressure, industrial policy, and strategic resource controls into a unified framework.
At the heart of this approach are two key principles:
- Technological self-reliance — reducing dependence on foreign technology, especially from the US.
- Supply chain security — developing domestic capacity in critical industries like semiconductors, AI, biotechnology, and clean energy.
For China, tariffs are now just one small part of a larger toolkit.
The anti-monopoly investigation into Google and the blacklisting of Illumina and PVH send a clear message: US firms with deep commercial interests in China can be targeted selectively.
This is strategic.
Beijing understands that while the US government imposes tariffs, many American companies are heavily dependent on China for growth. By pressuring firms like Google or PVH — whose brands rely on Chinese consumers or supply chains — China can indirectly create domestic political pressure within the US to moderate its approach.
Moreover, the rare metals export controls hit at an area where China holds real leverage.
China controls around 60–80 per cent of the global supply of certain rare earth elements — materials critical to producing everything from electric vehicle batteries to advanced weapons systems.
Restricting access to these materials is far more painful to US industry than tariffs on soybeans or LNG.
President Trump’s return to tariff escalation was expected, given his past use of trade penalties as negotiating tools. For Trump, tariffs serve multiple political and economic purposes:
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Appealing to his domestic base by appearing “tough” on China.
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Creating bargaining leverage to extract trade concessions.
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Reducing US dependence on Chinese manufacturing.
But Trump’s strategy has risks.
China is no longer reacting naively. It has studied Trump’s tactics closely and understands that tariffs, for him, are often about negotiation rather than pure economic warfare.
This explains why China’s retaliation — while assertive — has been carefully calibrated.
Beijing wants to appear strong but avoid uncontrolled escalation that could damage its own slowing economy.
Internally, China faces significant economic headwinds. GDP growth is sluggish — far from the double-digit rates of the past. Foreign direct investment (FDI) inflows have been declining, partly due to concerns over US-China tensions and an uncertain regulatory environment.
At the same time, China’s manufacturing sector remains deeply tied to US and global supply chains.
If Beijing retaliates too aggressively, it risks undermining business confidence at home and further weakening its economy.
That’s why China has avoided an all-out export ban on rare earths or full-scale restrictions on US firms. Instead, it applies targeted pressure — enough to get Washington’s attention but not enough to trigger financial panic or capital flight from China.
Crucially, the US-China trade war is not a temporary dispute that will go away with a new president or a new round of negotiations.
It reflects deep, structural competition between the world’s two largest economies — a battle over:
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Technological dominance
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Control of critical supply chains
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Global trade rules
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Geopolitical influence in Asia and beyond
Both sides view these issues as existential.
From the US perspective, China’s rise threatens American technological leadership and global influence. From China’s perspective, US trade and tech policy is seen as a deliberate attempt to contain its growth.
This is why the dispute has expanded beyond tariffs into areas like:
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Semiconductor export bans
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Investment restrictions
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Controls on data flows and digital infrastructure
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Competition in 5G, AI, and clean energy technologies
The escalation of the trade war carries major risks for the global economy.
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US farmers and energy producers facing Chinese tariffs.
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American tech companies exposed to Chinese regulatory action.
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Chinese exporters dependent on the US market.
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Global investors caught in financial market volatility.
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Non-US energy suppliers (e.g., Middle East, Russia, Australia) could replace US crude and LNG exports to China.
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Countries like Vietnam, Mexico, and India might benefit as US and Chinese firms diversify supply chains.
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Domestic Chinese tech firms could gain market share as US competitors face restrictions.
But overall, the global economy loses from reduced trade flows, higher prices, and disrupted supply chains.
Both Washington and Beijing have signaled openness to dialogue — but on their own terms.
The risk is that miscalculation or domestic political pressures could push the conflict into more dangerous territory.
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Broader export controls by China on critical minerals.
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US bans on Chinese tech products or apps.
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Financial decoupling measures targeting Chinese investments.
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Military tensions in the South China Sea or Taiwan.
For now, both sides appear to prefer controlled escalation — signaling strength while leaving room for negotiation.
The latest escalation in the US-China trade war marks not just another round of tariffs but the evolution of a long-term strategic rivalry.
China has moved beyond symbolic tariff retaliation toward a more sophisticated form of economic statecraft — using its regulatory power, strategic resources, and domestic market as tools of geopolitical influence.
For the US, tariffs remain a core weapon, but the battle increasingly involves technology, finance, and supply chains.
The world should expect this conflict to shape global trade and politics for years to come. Neither side is likely to back down completely — but both understand that economic warfare carries high risks.
The era of globalization driven by US-China interdependence is giving way to a new era: one of strategic competition, selective decoupling, and economic rivalry.
