The renewed tensions between the U.S. and China under Trump’s leadership has intensified global tensions – and are now reshaping trade policies and geopolitical dynamics.

From allegations of espionage through TikTok, cozying up to Taiwan, and now the tariffs and technology bans, the US has effectively started a high-stakes battle with China – making ripples in worldwide. China, an economic superpower in its own right, is now starting to retaliate in kind.

Introduction

China and the United States, the two biggest economies of today’s world, are consequently the most important bilateral relationship. Even though there have always been tensions between the two countries, diplomatic relations and economic were relatively stable between them till 2018. Donald Trump’s ‘America first’ policy marked a big shift, changing the relationship from polite co-operation to outright contention. The changes were mainly brought about because of heavy trade tariffs, technology bans, America’s closeness to Taiwan, and direct diplomatic confrontations, including closures of consulates and accusations of espionage.

The coronavirus pandemic also really damaged the relationship, and now all these tensions – which have led to a diplomatic fallout – have proven difficult to repair. Even under the Biden administration, many Trump-era policies (from his first tenure) remained intact and there were limited efforts of détente, suggesting a fundamental and lasting shift in Sino-American relations.

With Trump back in office, this ongoing rivalry continues to reshape the global economic order and power dynamics in the Asian-Pacific region, with implications extending far beyond bilateral relations.

Economic Impact

With Trump’s election won, the economic rivalry between the US and China has entered a new phase of heightened tensions. After assuming office, President Trump levied 10% duties on all Chinese imports, a move that will certainly raise prices of many goods, including electronics, toys, and appliances. Even when the President postponed his earlier threat of taxing imports from Mexico and Canada, tariffs on China are still moving ahead. Trump has also instituted an order, eliminating the ‘de minimis’ exception for China, which allowed low-value items of up to $800 to be imported into the US duty-free. This will result in a seismic shift in the supply chains of the fashion industry, especially for Chinese manufacturers like Temu and Shein.

In retaliation, China’s President Xi Jinping has taken both tariff and non-tariff measures. These include a 15% tariff on US coal and LNG imports, 10% on oil and machinery, and strategic export controls on rare earth metals.  Beyond tariffs, China has launched investigations into the tech giant Google and declared certain US brands to be ‘unreliable entities’, escalating the economic tensions to new sectors. Chinese authorities have also lodged a complaint with the World Trade Organization citing grievances about America’s ‘discriminatory and protectionist’ policies, that are in direct violation of trade rules. This brewing conflict signals a potential new trade war between China and the US.

Another point of contention between the two countries is the technology rivalry and the AI race. The US views China’s rapidly increasing technological advancement, particularly in telecommunications and artificial intelligence, as a strategic threat. In response, it has sought to curb China’s progress by restricting the country’s access to the global semiconductor supply, particularly from Taiwan - a self-governing island that China claims as its own, adding to long-standing tensions. The development of China’s DeepSeek AI sent shockwaves through Silicon Valley, leading to the largest single-day stock market loss for several leading American tech corporations.

Impact on Global and Regional Markets

The International Monetary Fund has previously warned countries against unilateral measures like tariffs, claiming that such policies ‘rarely improve domestic prospects durably’ and ‘leave every country worse off’. Tariffs distort market efficiency, raise the costs of production, limit consumer options and increase inflation. Both countries face significant risks – China’s export dependent sectors are vulnerable to tariffs, while American consumers and business will have to bear the brunt of the increased prices. While Trump is framing them as bargaining tools as well as measures to halt contraband supply and control the trade deficit, tariffs will prove counterproductive for the American public.

These trade tensions also have significant environmental risks; companies facing increased production costs due to tariffs often prioritize cost-cutting over sustainability outputs. For example, Coca-Cola has resorted to using more plastic because of Trump’s aluminum tariffs. For a world already facing irrevocable climate disaster, this may be one of the worst side effects of the tariffs.

Tariffs on China will have far-reaching repercussions for economies worldwide. While China may attempt to diversify its export markets, a decline in demand for Chinese goods could also reduce demand for raw materials, adversely affecting resource-dependent economies like those in Sub-Saharan Africa.

As the US and China compete for influence, smaller countries may face increasing pressure to align with one side or the other, potentially fragmenting the global economic order into competing spheres of influence. The Asia-Pacific region may find itself at as crossroads, as countries try to navigate relationships with both the US and China. Southeast Asian nations – Vietnam in particular – could possibly emerge as significant beneficiaries, if the US diversifies supply chains away from China. However, this shift might also invite increased American scrutiny over potential loopholes and tariff circumvention. Similarly, nations such as India might seize this opportunity to attract manufacturing investment and increase exports to the US.

Trump’s tariffs on China are not just economic tools, but strategic instruments shaping global geopolitics. The US-China rivalry has catalyzed a restructuring of the global economic order. As China strengthens its strategic partnerships, particularly with Russia and through initiatives like BRICS, we are witnessing the emergence of new economic systems. These new tariffs are likely to accelerate efforts to reduce global reliance on the US dollar, which has been long weaponized by the US. We could see a surge in yuan-based settlements and alternative financial networks. The formation of new economic blocs like the IPEF and the BRI also demonstrate the fragmentation of the global economy.

Ultimately, trade tariffs and sanctions do more than restrict commerce, and as we move further away from American hegemony, the challenge ahead lies in managing an increasingly multipolar world.

Conclusion / Overview

With Trump back in office, economic warfare against China is entering a new phase of heightened tensions, raising concerns about long-term geopolitical fragmentation. While economic policies such as tariffs are framed as protective measures, they often lead to unintended consequences, from higher consumer costs to supply chain disruptions. The implications extend beyond the two superpowers, affecting global trade, regional stability, and international institutions. As the world navigates this complex power struggle, the challenge lies in managing competition without escalating conflict.

Aleena Im – is an independent researcher and writer and is interested in international relations, current affairs. Courtesy

https://journal-neo.su/2025/03/01/us-vs-china-is-the-world-prepared-for-the-fallout/