US–China Trade Tensions

Maryam Aziz

The US–China trade conflict, which had its inception under the Trump administration in 2018, has regained prominence as a worldwide financial warfare this year. Although the previous trade conflict was predominantly oriented around tariffs and export opportunities, the reactivated hostilities have expanded into national interests, high-tech rivalry, and resource resilience (Force, 2025). This rivalry goes beyond trade conflicts into global governance challenges, impacting trade agreements, power strategies, and supply chains. This commentary investigates all areas of the revived US–China trade conflict, including its political, financial, and regional aspects, and also assesses its aftermath through state-led capitalism, international institutional arrangements, and theories of international agreements. It scrutinizes how the tension is reshaping international economic relations, influencing financial harmony, and impacting global diplomacy.

The root cause of the revived trade conflict includes the United States’ tariff policies and industrial development strategies, a central aspect of the reignited trade war (France and France, 2025). Widespread tariffs have been re-imposed on Chinese imports by the US, demonstrating financial security and state interests, including a 10% tariff on all Chinese imports (ET NOW, 2025). This has been levied under Trump’s Executive Order 14195 (2025), restoring isolationist policies with the objective of bolstering national industries. The US is a key impetus for the development of these policies, with the aim of restructuring its production sector, especially in heavy industry sectors. On the other hand, China’s economic capacity to withstand external pressure and its strategic measures have further contributed to the revival of the trade conflict.

Learning from previous trade wars, China has expanded its foreign market access and improved domestic resilience, especially in the high-tech sector (Times, 2024). China has levied tariffs on American coal, 15% on agricultural products, 15% on LNG, and 10% on crude oil, as a reaction to American tariffs, according to reports by BBC (Espiner, 2025). Subsequently, China has banned US exports (2025) and has curtailed the supply of vital minerals such as gallium, tungsten, and germanium, which are crucial for high-tech US semiconductor manufacturing. The US continues to restrict Chinese access to advanced semiconductor innovation, limiting Huawei and SMIC from acquiring high-end microelectronic technology (Gallagher, 2022). In retaliation, China has started making substantial investments in domestic semiconductor production and quantum computing to reduce dependence on Western technology. The consequences are significant. For the Chinese economy, the tension jeopardizes 5% GDP growth for the year 2025 by imposing trade barriers and lowering foreign direct investment (CNA, 2025), and the currency is facing devaluation risks; however, the government is intervening to stabilize currency fluctuations.

China has also started redirecting its trade focus, forging trade links with Africa, the Middle East, and South America (Roy, 2025). The CHIPS Act, passed during President Biden’s tenure (Kurilla, 2024), was primarily intended to boost local chip manufacturing, hindered by Chinese restrictions on rare earth mineral exports. Although some industries have gained advantages from limited competition, others are barred from Chinese business, affecting the livelihoods of farmers and export-oriented businesses. The trade conflict is also leading to the formation of new supply chain networks, particularly in states such as India, Vietnam, and Mexico, which are diverting manufacturing away from China.

However, EU and Japanese industries are finding a middle ground, preserving economic relations with both Beijing and Washington. The World Trade Organization faces an uphill battle in finding a balance between both the US and China, as both states undermine international trade laws. Following these patterns, China is fortifying trade ties outside the Western bloc, cementing trade cooperation with the Global South and BRICS (Times, 2024). Both countries are enacting strategic policies to achieve dominance in this war. The United States’ policies prioritize the industrial sector and concentrate on commercial isolationism. Moreover, the US is advancing strategies of military and technological disentanglement.

Domestic industry was further incentivized by Trump’s tariffs and Biden’s Inflation Reduction Act. In reciprocity, taxes and export restrictions were imposed on US coal and liquefied natural gas, which largely impacted US energy shipments. Furthermore, China has accelerated its BRI investments in Africa and South America. It is also tapping into economic diplomacy to mitigate American trade constraints. Dependence on the US dollar is decreasing as the digital yuan is growing globally (Sjs, 2024). Concurrently, China is also intensifying its economic collaboration with Gulf States, enabling yuan-denominated oil deals to undercut the petrodollar’s hegemony.

The impact of trade disputes on international cooperation is significant. States like Japan, South Korea, and ASEAN countries are forging strategic coalitions and calibrating trade dynamics with both major powers, while Europe, on the other hand, is caught between American and Chinese pressure to harmonize its trade policies, as stated by Copenhagen Business School (2025). These economic tensions could further overflow into military clashes, especially on the issue of Taiwan and the South China Sea. Both states are going head-to-head in dominating technological and economic markets. Eventually, this trade conflict is not solely an economic issue; it is a clash over who will shape the future of international hegemony, technological advancement, and financial order. The consequences will shape the global landscape in the future, determining the fate of international economic architecture or leading to new models of collective action amid escalating trade tensions.