The US-China trade conflict reignited in February 2025, with both nations imposing retaliatory tariffs and non-tariff measures. Below is an analysis of the current situation, its drivers, and potential consequences, synthesized from publicly available sources.
1. US Tariffs on China
On February 4, 2025, the Trump administration imposed a 10% tariff on all Chinese imports, citing China’s alleged failure to curb fentanyl trafficking and secure borders. This move added to existing tariffs from Trump’s first term (2017–2021), which ranged from 10% to 25% on over $400 billion of goods, including electronics, machinery, and apparel. The White House framed the tariffs as addressing a “national emergency” linked to drug-related deaths and border security, leveraging trade policy as a geopolitical tool according to The Diplomat.
Canada and Mexico secured temporary tariff pauses by agreeing to stricter border enforcement, but China faced immediate penalties. Analysts suggest the tariffs are partly a bargaining tactic, though previous tariffs from Trump’s first term remain intact, signaling a hardened stance .
2. China’s Retaliation
China responded swiftly with tariffs on US coal (15%), liquefied natural gas (15%), crude oil (10%), agricultural machinery, and large vehicles. These measures targeted sectors where US exports to China are limited but symbolically significant. For instance, US LNG accounted for only 5.4% of China’s imports in 2024, minimizing direct economic harm to Beijing according to The New York Times.
Non-tariff measures included:
- Export controls on tungsten and 25 rare earth metals, critical for advanced technology, justified as protecting “national security” but widely seen as strategic retaliation .
- Corporate sanctions: PVH Corp (owner of Calvin Klein and Tommy Hilfiger) and biotech firm Illumina were added to China’s Unreliable Entities List for allegedly discriminating against Chinese companies .
- An antitrust probe into Google, disrupting its dealings with Chinese firms despite Google’s limited presence in China .
3. Economic and Market Impacts
- Currency depreciation: The offshore yuan fell 0.3%, while commodity-linked currencies like the Australian and New Zealand dollars dropped 0.7% according to Bloomberg.
- Inflation risks: Analysts warn that tariffs and supply chain disruptions could raise prices for US consumers, particularly in electronics (38% of US computer imports come from China) and energy sectors .
- Sector vulnerabilities: US imports of electric batteries (53% from China), toys (77%), and smartphones (47%) face heightened costs .
4. Geopolitical and Legal Dimensions
- WTO dispute: China filed a WTO case against the US, though the mechanism is paralyzed due to unresolved judge appointments since 2019. This allows Beijing to claim the “moral high ground” while avoiding immediate economic fallout .
- Strategic leverage: China’s dominance in rare earth processing (90% global share) underscores its ability to weaponize supply chains, though it risks overextending amid domestic economic fragility .
5. Broader Context and Scenarios
- Historical precedent: The 2018–2020 tariffs targeted intellectual property theft and trade imbalances, but the 2025 measures focus on border security and drug policy, reflecting Trump’s “America First” agenda .
- Economic projections: According to the Economist Intelligence Unit (EIU), a 20-percentage-point tariff increase could reduce China’s GDP by 0.6 percentage points by 2027. A worst-case 60% tariff scenario could slash growth by 2.5 points, though fiscal stimulus may mitigate losses according to EIU.
Conclusion
The latest escalation highlights the deepening interdependence and rivalry between the US and China. While tariffs serve as political tools, their economic costs—higher prices, market volatility, and supply chain disruptions—risk global stagflation. China’s calibrated retaliation reflects a strategy to minimize self-harm while asserting geopolitical resilience. The conflict’s trajectory hinges on bilateral negotiations, WTO reforms, and shifts in global trade alliances.
Freelance Writer
