Introduction
The trade barriers and quota policies initiated by the United States against China neither originated with the Trump administration nor were they implemented for the first time specifically against China. In fact, when these measures were introduced, the use of economic and trade tools as instruments of warfare was not deliberately intended by the United States. To fully understand this rationale, one must examine Section 301 of the Trade Act of 1974. This legislation grants the U.S. President the authority to take all appropriate actions—including both tariff and non-tariff retaliatory measures—to eliminate any act, policy, or practice of a foreign government that violates an international trade agreement or is deemed unjustifiable, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce.
Within the scope of this authority, the first instance in which the United States implemented tariff and quota policies that evolved into a trade war occurred in the 1980s during trade disputes with Japan in the automotive sector.
This trade war led to an increase in the unemployment rate in the United States; however, as a result of the conflict, the U.S. achieved certain tactical gains over Japan and succeeded in restricting the sale of Japanese cars in the American market through the imposition of quotas.
Immediately after the end of this trade war, by the 1990s, the United States initiated investigations against China under Section 301 of the aforementioned Trade Act, specifically concerning intellectual property rights. Although these investigations continued intermittently until 2010, they were ultimately concluded by a ruling from the World Trade Organisation (WTO) in that year. In 2009, the United States imposed additional import duties on truck tires imported from China—35% in the first year, 30% in the second, and 25% in the third—which led China to file a complaint with the WTO. In the final ruling of case DS339, the United States prevailed, and the WTO confirmed that the additional tariffs were not in violation of trade regulations.
The process that had initially begun with China was brought back to the forefront during President Trump’s first term in office. On July 24, 2017, the United States announced the initiation of a new investigation against China under Section 301 of the Trade Act. Subsequently, in March 2018, the United States began imposing additional tariffs of 25% on steel and 10% on aluminium imports from China. One month later, in retaliation, China imposed extra tariffs on 128 U.S. products. In June 2018, the United States announced the implementation of the first list of tariffs, to which China responded with retaliatory measures. Under this round, an additional 25% tariff was imposed on 818 Chinese-origin products. By August, the United States had initiated the so-called second list of tariffs, imposing additional duties on a further 279 products. The situation continued to escalate, and by September, the United States had implemented the third list of tariffs, raising the existing rate from 10% to 25%.
Although tariff increases were temporarily paused, on May 15, 2019, the United States not only imposed another round of tariff hikes but also added China’s Huawei to its trade blacklist. In August 2019, the United States implemented the fourth list of tariffs against China, which entailed an additional 10% tariff on $300 billion worth of Chinese goods. In January 2020, the so-called Phase One agreement was signed, signalling a step toward mutual understanding between the two parties. It is likely that the underlying, though unstated, reason for this agreement was the economic damage caused by unforeseen pandemics. Although China pledged to purchase an additional $200 billion worth of goods from the United States, it ultimately failed to meet this commitment due to the rapid spread of COVID-19 cases.
In response to the additional tariffs, China filed a complaint with the WTO during this process. The case, designated as DS543, concluded in China’s favour. The WTO ruled that the additional quotas and tariffs imposed on China were unjust, citing a violation of the Most-Favoured-Nation (MFN) principle. As Trump’s first term came to an end and President Biden showed little interest in continuing the trade war, the first U.S.-China trade war quietly came to a close. The trade war led to a monthly decline of $1.8 billion in real income in the U.S. economy starting in 2018. As for China, its economy experienced a 0.5 to 0.8 percentage point drop in GDP growth in 2019. From a global trade perspective, the conflict resulted in a 1.5 to 2 per cent slowdown in international trade activity.
Tariff and Quota Policies During Trump’s Second Presidency
On January 20, 2025, Donald Trump assumed office as the 47th President of the United States. By February 1, the United States announced the implementation of trade tariffs against Canada, Mexico, and China. Under these measures, an additional 10% quota was to be imposed on imports from China. On March 4, in a move differing from his previous term, Trump announced an additional 10% quota on Chinese imports, stating that the measure was intended as a response to the illegal sale of fentanyl.
On April 2, Trump announced a new round of tariffs under the name “Liberation Day Tariffs.” According to this policy, a blanket 10% quota was imposed on all imports. As a result of this measure, the total quota applied to Chinese imports rose to 54%. On April 9, with successive additions, the total quota imposed by the United States on Chinese imports reached as high as 145%. However, on May 14, in accordance with a negotiated agreement, all tariffs were suspended for 90 days.
Unlike during Trump’s previous term, this time his policies were met with a much stronger response from China. Although WTO officials were involved in the final agreement, China chose not to pursue a legal resolution through the WTO. Instead, it opted for retaliatory measures. As Trump himself outlines in his book, his strategy involves applying maximum pressure during negotiations and then gradually easing that pressure— a tactic that China was well aware of. This awareness may have led China to adopt a different approach in response.
Short-Term Economic Impacts on China
The tariffs imposed on China have impacted several key sectors of its economy, including GDP, exports, consumer prices, employment, trade networks, and financial markets. One of the clearest indicators of this impact is the revision of GDP growth forecasts. For instance, Goldman Sachs has lowered its projections for China’s GDP growth rate from 4% to 3.5% for both 2025 and 2026, anticipating a 0.5 percentage point decline. If we frame China’s economic growth within a 100-point scale, this implies a projected decrease of 2.6 points in total, with approximately 2.4 points of that decline expected to occur in 2025 alone.
According to official data, in the first four months of 2025, China’s exports to the United States declined by 2.5% compared to the same period in the previous year, while its imports from the U.S. fell by 4.7%. In an effort to offset the loss of trade with the United States, China has sought to fill this gap by strengthening economic ties with Southeast Asian countries.
Although the tariffs had an impact on consumer prices in China, the recovery in this area occurred relatively quickly. The more significant challenges emerged in potential disruptions to production and supply chains, where adjustments proved to be more complex and longer-lasting.
During Trump’s first term, proposals advocating for a substantial increase in the U.S. population as a means to counterbalance China’s global influence gained attention, most notably those put forward by writer Matthew Yglesias, who argued that expanding the U.S. population to one billion could strengthen America’s strategic position vis-à-vis China. However, this approach was not aligned with Trump’s anti-immigration policies. As a result, rather than seeking to increase the U.S. population or relocate production back to the United States, Trump pursued a different strategy: shifting manufacturing from China to other Asian countries. Leading this shift were nations such as India and Vietnam. Tech giants like Apple played a pioneering role in this process by emphasising their intention to move production from China to India and Vietnam, thereby signalling a broader trend in global supply chain realignment. Although short-term fluctuations were observed in the markets, these primarily affected the U.S. domestic economy rather than global markets.
China’s Political and Economic Responses
Having learned from previous trade wars, China opted for retaliation rather than pursuing legal channels this time. In response to U.S. tariffs, China imposed reciprocal measures. For example, following the 10% tariff announced by the United States on February 1, China retaliated by applying the same 10% tariff on all U.S. products. In response to the March 4 quota imposed by the United States, China introduced a 34% quota on U.S. products, primarily targeting key agricultural imports such as soybeans, beans, corn, and meat. In response to the 54% quota imposed on Chinese goods under the April “Liberation Day” tariffs, China retaliated by implementing a 125% quota on U.S. imports. The tariff war ultimately came to a halt following the United States’ final response of imposing a 145% quota. In the subsequent phase, both sides reached an agreement. The only notable difference in China’s retaliatory quota policy was that its measures targeted specific products rather than applying broadly. This selective approach was due to China’s trade surplus with the United States, which limited its ability to impose equivalent tariffs across the board without harming its export-dependent sectors.
In addition to economic retaliation, China also employed strong political rhetoric against the United States. For example, shortly after the February 1 tariffs were announced, Chinese state media shared an image of Mao Zedong accompanied by the message, “Capitulation to bullies is dangerous, and it would not back down,” signalling a firm stance and invoking nationalist sentiment in response to U.S. pressure. Through this approach, China succeeded in achieving its objectives without making concessions, both domestically and internationally. By maintaining a firm stance, it reinforced internal political unity and projected resilience in the face of external pressure.
Global Implications
The trade wars initiated by the United States also had significant repercussions on the global economy. One of the most heavily impacted sectors was logistics and transportation. The disruption of international trade led to a decline of up to 20% in this industry, reflecting the broader slowdown in global supply chain activity. Subsequently, the global trade growth rate declined from 1.7% to 1.2%, indicating a marked slowdown in international economic activity as a result of the trade tensions.
Due to the trade war, global costs have also increased significantly. In the United States, for example, the annual financial burden on households rose by approximately $1,600 to $2,000. This added strain accelerated the erosion of purchasing power in the face of rising inflation. According to OECD reports, global inflation is projected to be 0.5 percentage points higher this year as a result of the trade wars.
Global GDP growth forecasts have also been revised downward, with projections falling from 3.1% to 2.7%. This marks a decline to levels even lower than those observed prior to the COVID-19 pandemic.
The lack of confidence in resolving such economic conflicts through institutions like the WTO has led to both sides inflicting harm not only on each other but also on the global economy. This process has exposed gaps in the global system and prompted actors to seek out strategic alliances. The United States, for instance, has aimed to secure its position by strengthening ties with Gulf states, thereby reinforcing the petrodollar system. In contrast, China has sought to expand the scale of the global market and establish new economic partnerships, particularly with Europe. To this end, China is accelerating investments in Africa and pursuing coordinated strategies with BRICS+ countries as part of its broader effort to reshape the global economic order.
Agreement and Reconciliation
On May 14, 2025, U.S. and Chinese representatives met in Geneva, where several key decisions were announced. The United States declared that it would suspend the additional 24 tariff points it had imposed for a period of 90 days, reducing its overall tariff rate from 145% to 30%. In parallel, China also announced the suspension of its own additional 24 tariff points for 90 days, lowering its total tariff rate from 125% to 10%.
In this way, the situation was effectively rebalanced. While this equilibrium suggests that neither side emerged as a clear winner, it also meant that the United States was unable to generate the additional revenue it had aimed for, placing China in a tactically advantageous position. The U.S. had previously won the 2009 WTO case but lost the 2018 case through the same institution. This time, however, it failed to achieve a definitive victory in a direct, bilateral confrontation with China. Such developments not only highlight the evolving nature of global power dynamics but also provide concrete examples of the broader transformation underway in the global economic system.