The current US-China tariff war under President Trump 2.0 represents a significant escalation in the global economic standoff, with consequences that go far beyond mere trade numbers.
After the US imposed a 104% total tariff on Chinese goods—starting with 34% and culminating in an additional 50%—China retaliated with tariffs of up to 84%, effective Thursday. However, the battle goes deeper than tit-for-tat duties; it's turning into a broader contest for global economic dominance and supply chain control.
China, though outwardly resolute and claiming psychological and policy preparedness, finds itself grappling with internal vulnerabilities—including overcapacity, low domestic consumption, high unemployment, and deflation. While exports to the US make up only 2.3% of its GDP, the true impact lies in the squeeze on re-export hubs like Vietnam, Thailand, and Mexico—countries China has used to channel goods to bypass tariffs.
The Trump administration’s strategy appears to be multipronged:
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Direct targeting of Chinese exports with sky-high tariffs.
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Hitting China's proxy supply chains, including Vietnam (46%), Cambodia (49%), and Thailand (36%).
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Straining semiconductor collaborations with Japan and South Korea through new tariffs (24-25%).
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Undermining EU-China ties by raising tariffs on EU goods (20%) and India (26%).
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Weaponizing trade deals, such as eliminating the $800 duty-free import exemption and leveraging the TikTok controversy as bargaining leverage.
The Chinese government’s official rhetoric is combative, but internal dissent is growing. Scholars such as Zheng Yongnian and Lu Feng are urging Beijing to avoid repeating Cold War-era mistakes. They see this crisis not only as a test but a chance to fix structural domestic issues like weak consumption and an unsustainable trade surplus model.
There’s also cautious talk within China of a broader “victim alliance”—possibly through SCO or BRICS—to challenge Trump’s tariff regime. However, even Chinese strategists admit that forming a cohesive anti-US economic bloc will be difficult, especially when other countries fear economic retaliation or prefer bilateral negotiations with the US.
More subtly, the Trump 2.0 administration is reshaping the global supply chain architecture, aiming for a "decentralised industrial puzzle":
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High-end manufacturing remains in the US.
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Mid-tier production shifts to Latin America, India, and Southeast Asia.
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Financial services and tech/IP stay locked within US-European control. In this layout, China risks becoming just another interchangeable node, no longer the world’s irreplaceable factory.
Finally, China’s GDP growth target of 5% is under serious threat. Domestic overcapacity, limited domestic demand, and higher re-export costs could combine into a perfect economic storm, especially as more US partners choose sides. This includes Mexico, which is under pressure due to its auto trade dependency with the US, and Canada, already imposing steep tariffs on Chinese EVs and steel.
In essence, this is no longer a simple trade dispute—it’s a strategic battle over the future of the global economic order, with China’s manufacturing supremacy, export strategy, and geopolitical partnerships all under siege.
