Since assuming his office for the second term, the global stage has witnessed a resurgence of US-China tensions reminiscent of his initial tenure. The “Trump 2.0” administration has swiftly reinstated aggressive trade policies, prompting China to adopt a multifaceted and equally venomous strategy in response.
In early February 2025, President Trump signed executive orders imposing additional tariffs on key trading partners, including China. Effective February 4, 2025, the US levied a 10% tariff on all Chinese imports, citing concerns over trade imbalances and national security. This move marked a significant escalation in trade tensions, aiming to pressure China into addressing issues such as intellectual property theft and market access restrictions.
China’s noticeable shift from the negotiating table to AI-driven economic-muscling
In retaliation, China has been swift enough to not only surprise the Trump administration but also the corporate conglomerates across the globe as it implemented several key measures highlighting a tit-for-tat response mechanism. On February 4, 2025, China announced additional tariffs on certain U.S. imports, effective February 10, 2025. These include a 15% duty on US coal and coke, and a 10% tariff on 72 categories of products such as oil, large-engine vehicles, and agricultural machinery, directly targeting industries critical to the US economy. These measures are poised to disrupt American energy exports and reshape global trade dynamics.
The staggering impact on the US economy can be assessed from the fact that in 2024, the US supplied approximately 11.7% of China’s coke & coal imports. The new 15% tariff is expected to reduce the competitiveness of US coal in the Chinese market, prompting China to seek alternative suppliers and as the reports suggest that negotiations seem to have already been initiated by Chinese importers with the Australian and Canadian exporters—who are equally dumb-found because of Trump 2.0 new tariffs (especially Canada with a 25% tariff on its exports to the US). This shift may lead to decreased market share for US coal producers and potential revenue losses.
The US, as a leading global LNG exporter, sent about 173 billion cubic feet of LNG to China in 2023, constituting roughly 2.3% of its total natural gas exports. The 15% tariff is likely to diminish the price competitiveness of US LNG, potentially resulting in reduced export volumes to China and compelling American producers to explore alternative markets. U.S. crude oil exports to China experienced a 46% decline in 2024, falling to 81.9 million barrels from 150.6 million barrels the previous year. The newly imposed 10% tariff may further discourage Chinese imports of US crude, exacerbating the downward trend and affecting the US oil industry’s revenues.
This trade-war between the global giants is likely to have several ripple effects. As China reduces energy imports from the US, it is likely to increase purchases from other countries, potentially altering global energy trade routes and pricing structures. On the flip side, the US energy producers may face oversupply issues and downward pressure on prices due to decreased access to the Chinese market, necessitating strategic pivots to other international buyers or increased domestic consumption by incentivising local manufacturing—a possibility that Trump has been talking about throughout his campaign trail. In reality, the corporate world believes that China’s retaliatory tariffs on US energy exports are set to significantly impact American coal, LNG, and crude oil industries by reducing their competitiveness in a key market, prompting a need for strategic adjustments in response to the evolving global trade landscape.
Beijing has simultaneously tightened export controls on essential semiconductor materials, including gallium, germanium, and antimony. This move, effective since December 2024, has significantly impacted global electronics supply chains, particularly affecting U.S. allies like Japan and even US brands like iPhone and Dell. Japanese officials have expressed concerns over the stability of these supply chains, highlighting the broader implications of China’s export restrictions. By restricting exports of critical materials, global markets are hinting that China can create supply chain vulnerabilities for industries in the US and its allied countries, potentially compelling them to reconsider their trade strategies or worse to dent their revenues.
China has also added major US firms, such as PVH (owner of Calvin Klein and Tommy Hilfiger) and biotech company Illumina, to its “unreliable entities” list. This action permits Chinese authorities to impose sanctions, increasing operational uncertainties for American businesses in China. The blacklisting reflects rising economic nationalism and poses significant challenges for US companies navigating the strained bilateral relations. This has literally pushed a panic button amongst businesses as they have started evaluating the costs and feasibility of relocating supply chains from China following the new tariffs. However, many companies find relocation too expensive due to established relationships with compliant manufacturers. Companies like Apple have already hinted at expanding production in countries such as India, aiming to reduce reliance on Chinese manufacturing. As per the latest from Tech-world, Apple plans to produce 25% of its iPhones in India by 2027, although challenges like supply chain and workforce issues remain.
With the rising sense of countering Trump’s “American First”, President Xi Jinping seems to have unfurled its “China First” card, which means not only doubling down on efforts to expand the Belt and Road Initiative (BRI) but also expanding the navigational routes to strengthen its trade linkages with regions re-evaluating their foreign and trade policies after Trump 2.0. Reports generated from Chinese media showcase that President Xi Jinping has convened summits with China’s leading tech entrepreneurs, including figures from Huawei and BYD. These meetings aim to bolster domestic innovation and reduce reliance on US technology, signalling a strategic pivot towards self-sufficiency in critical sectors. Xi emphasized patriotism and entrepreneurship, urging business leaders to strengthen their enterprises to support China’s socialist modernization.
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This nationalist and “China First” sentiment is being echoed by the Chinese leadership and state media as they have articulated a blend of caution and resilience in response to the Trump administration’s policies. Chinese Vice-Premier Ding Xuexiang, while speaking at the World Economic Forum in Davos had already cautioned that a re-start of the global trade war would yield “no winners.” He underscored China’s commitment to a “win-win” global trading system, advocating for reduced tariffs and enhanced globalization. Ding criticized protectionism and urged collaboration to prevent the division of the global economy into rival blocs. Chinese state media and even economic experts have expressed a mix of skepticism and strategic optimism regarding the Trump administration’s approach. While acknowledging the challenges posed by US policies, there is a prevailing sentiment that China’s economic resilience and diversified global partnerships can mitigate adverse effects.
Interestingly, China’s swift and strategic response to the recent US tariffs underscores its preparedness and resilience in navigating escalating trade tensions but at the same time showcases a noticeable shift from the negotiating table to AI-powered economic-muscling. Though there is no evidence yet, technological experts believe that with rapid advancements in AI, China surprised many by retaliating against Trump 2.0 within no time. In anticipation of potential trade conflicts, Beijing has expanded its trade partnerships across Asia, Africa, and the Middle East, reducing reliance on the US market since 2016. This diversification has enabled China to mitigate the impact of US tariffs during the Trump 1.0 administration by bolstering alternative export destinations and securing new import sources. Beijing has also been working intensely since then to lessen dependence on imports by leveraging investments in domestic technology and manufacturing sectors. Initiatives such as the “Made in China 2025” plan aim to achieve self-sufficiency in critical industries, enhancing China’s ability to withstand external economic pressures. Interestingly, as if pre-empting the resurgence of trade wars, China has accumulated reserves of essential commodities, including energy resources and raw materials, to cushion against supply chain disruptions. This stockpiling strategy provides a buffer, allowing for a more measured response to sudden trade policy changes.
China’s approach to the trade war has broader geopolitical ramifications. By strengthening economic relationships with countries in Asia, Africa, and the Middle East, China is fostering a network of mutual economic interests. This strategy not only opens new markets for Chinese goods but also positions China as a central figure in global trade, potentially diminishing U.S. influence in these regions.
Through initiatives like the Belt and Road, China is investing in infrastructure projects across these continents, facilitating smoother trade flows and reinforcing economic alliances. These investments are creating interdependencies that may realign global trade patterns in favour of China. Collaborations with resource-rich countries ensure a steady supply of essential commodities to China, reducing vulnerability to trade disruptions. By securing alternative sources of raw materials and energy, China enhances its economic resilience against external pressures. In actuality, Beijing’s preparedness and rapid, calculated responses to US trade actions reflect a comprehensive strategy designed to safeguard its economic interests and assert its role in the global arena. This multifaceted approach not only addresses immediate challenges posed by tariffs but also seeks to reshape international trade dynamics in the long term.
In the wake of ever-shifting geopolitical and economic sands, it is pretty much clear that the escalating US-China trade tensions have far-reaching consequences beyond the two nations. Countries in Asia have already started feeling the heat as they experience shifts in manufacturing and supply chains because many of the tech companies are scrambling to navigate the trade barriers between the US and China. This realignment could present both challenges and opportunities for regional economies. Nations in Africa and the Middle East might find avenues to deepen trade relations with China as it seeks alternative markets and sources for raw materials, potentially leading to increased investments and economic collaboration in these regions. The intensifying rivalry may prompt countries across these continents to reassess their foreign policies and economic alliances, balancing relations between the two major powers to safeguard their national interests.
While China’s retaliatory measures and strategic initiatives demonstrate its capacity to disrupt global supply chains, the effectiveness of these actions in “winning” the trade war remains uncertain. The interconnected nature of the global economy means that prolonged trade conflicts can have widespread adverse effects. Both the US and China face economic risks, and the outcome may depend on their willingness to engage in negotiations and seek mutually beneficial solutions.
