#9 China Scholar Insights: the China-U.S. Trade War and the Trump 2.0 Tariff Stick
Trump’s unilateral tariffs may have their own underlying political significance, yet a sustainable economic environment requires cooperation, predictability, and mutual respect.
Welcome to the 9th edition of China Scholar Insights!
China Scholar Insights is a feature aiming to provide you with the latest analysis on issues that Chinese scholars and strategic communities are focusing on. We carefully select commentary and highlight key insights. Questions and feedback can be directed to sch0625@gmail.com
I’m SUN Chenghao, a fellow with the Center for International Security and Strategy (CISS) at Tsinghua University. ChinAffairsplus is a newsletter that shares Chinese academic articles focused on topics such as China’s foreign policy, China-U.S. relations, China-Europe relations, and more. This newsletter was co-founded by my research assistant, ZHANG Xueyu, and me.
China Scholars’ Insights on the China-U.S. Trade War and the Trump 2.0 Tariff Stick
Background
In April 2025, tensions between the world’s two largest economies once again erupted into a full-scale trade conflict, marking the onset of a second U.S.-China trade war. Sparked by sweeping new tariff measures introduced by President Donald Trump—who returned to office with an aggressively protectionist agenda—the dispute quickly escalated into a tit-for-tat confrontation with far-reaching global consequences. As of April 2025, the China-U.S. trade war has sharply escalated after the U.S. implemented a “reciprocal tariff” policy aimed specifically at China, resulting in an ultimate 145% U.S. tariff on Chinese imports and an 84% tariff retaliation from China on American goods. China’s response—matching tariffs and imposing export controls—demonstrates its determination to resist economic pressure. Other entities, including the EU, Canada, and Japan, have also expressed concerns about the aggressive tariff policy, yet they are more negotiation-oriented and some have only implemented limited retaliation.
Summary
The 2025 U.S.-China trade war highlights the complex trade-offs of aggressive tariff policies. While the U.S. aimed to protect domestic industries and assert trade leverage, the benefits have been limited. Higher tariffs raised consumer prices, disrupted supply chains, and provoked strong retaliation from China, hurting both U.S. and China exporters and heightening economic uncertainty.
The costs of escalation—slower trade, reduced investor confidence, and rising geopolitical tensions—may outweigh short-term strategic gains. The new “reciprocal tariff” policy, while balancing the U.S. trade deficit and promoting “fairness” in theory, risks fueling a cycle of retaliation that weakens the global trade system and merely achieves its goal of reshoring the U.S. manufacturing sector.
Insights
Ma Hong: What Are the Costs and Challenges of Trump’s “Reciprocal Tariffs”?
Balancing the Bilateral Trade Deficit is Trump’s Main Objective for the “Reciprocal Tariff” Policy
On April 9, 2025, the “reciprocal tariff” policy was officially introduced in the U.S. While the policy may appear to promote fairness and protect American interests, it also introduces significant economic and strategic risks.
There are four main objectives for the U.S. reciprocal tariff policy: increasing federal revenue, curbing foreign competition to protect domestic industries and encourage the reshoring of manufacturing back to the United States, using the policy as a bargaining chip to lower tariffs on U.S. exports, and appealing to key voter demographics.
Judging from the formula for calculating reciprocal tariffs, the focus of the policy seems to be on balancing the bilateral trade deficit: the higher the export surplus a country has with the United States, the higher the tariff that is imposed on that country.
Reciprocal Tariffs cannot Reshore the Manufacturing Sector Back to the US
However, these goals may not be easily achieved. Mainstream economists mostly agree that reciprocal tariffs cannot effectively reshore the manufacturing sector. Instead, the policy could increase production costs for U.S. businesses, reduce operational efficiency, and disrupt global supply chains. In sectors where production is highly globalized—such as automobiles and semiconductors—imposing tariffs may lead to higher prices without significantly improving domestic competitiveness. In some cases, it may even harm U.S. industries that rely on imported components or intermediate goods.
History Highlights the Negative Outcomes of Taxes
Historically, similar protectionist measures have had mixed or even negative outcomes. For instance, the Smoot-Hawley Tariff Act of the 1930s raised U.S. tariffs significantly, which worsened the Great Depression by stifling international trade. The current global trade system, established under the frameworks of GATT and the WTO, promotes the Most Favored Nation (MFN) principle, where member countries agree to uniform tariff treatment. Trump’s policy violates WTO norms and has provoked retaliation from trade partners, leading to potential trade wars. Moreover, since many of the U.S.’s major trading partners already have low tariffs on U.S. goods, the room for reciprocal action is limited.
Therefore, although the reciprocal tariff policy is positioned as a means to achieve trade fairness, its practical implementation could trigger economic inefficiencies, geopolitical tension, and higher consumer costs. The policy’s risks outweigh the potential benefits, especially in a globally integrated economy. If pursued aggressively, the U.S. could end up bearing much of the cost itself, rather than gaining a strategic advantage.
ZHANG Monan: Trump’s Reciprocal Tariffs Reshape Global Trade
Trump’s Tariffs and the Emergence of the “Reciprocal Tariff” Strategy
Tariffs have long been considered the cornerstone of Trump’s trade policy. The “reciprocal tariff” is a new tool introduced by Trump to instigate a broader tariff war and is expected to become a key component of his second-term trade agenda. This policy reflects Trump’s consistent “America First” stance and represents a continuation and escalation of his unilateral protectionist approach.
Key Features of Trump’s Reciprocal Tariff Strategy
Trump’s “reciprocal tariff” strategy has several focal points:
First, tariff rate parity. Second, parity in import and export volumes. The U.S. government has repeatedly emphasized that it will start investigations into economies running large trade surpluses with the United States. The goal of implementing the “reciprocal tariff” policy is to reduce the U.S. trade deficit - additional tariffs will be imposed on countries with significant surpluses with the U.S. Third, parity in non-tariff measures. The Trump administration considers value-added tax (VAT), which is levied on final consumption, to be similar to a tariff. High VAT in other countries and regions is deemed unfair to the U.S. Therefore, divergent VAT practices may be included under the scope of the “reciprocal tariff” policy.
A Tactical Pause or Strategic Leverage?
At present, the Trump administration has not fully implemented the “reciprocal tariff” policy, suggesting that there may still be a window for trade negotiations. Some reports indicate that India, Japan, and Australia are preparing for potential trade agreements. Looking ahead, whether the Trump administration will primarily use the “reciprocal tariff” strategy to significantly raise barriers to entry or to employ leverage to pressure other countries into major deals remains to be seen.
Global Fallout: Igniting a Worldwide Trade War
The U.S. “reciprocal tariff” policy has already ignited the powder keg of a global trade war. Countries such as China, Canada, those of the European Union, Australia, and Brazil have quickly announced countermeasures, and others are considering taking similar action. What’s worse is that this confrontation is expanding from bilateral to multilateral levels and could potentially evolve into a global economic conflict. Faced with indiscriminate U.S. tariffs, American allies are seeking new partners, and other countries may be tempted to follow the U.S. in adopting protectionist trade policies.
Long-term Impacts: Disrupting the Global Economic Order
The “reciprocal tariff” policy will not only severely slow down global economic and trade growth but also lead to disorder in the global trade landscape. The implementation of “reciprocal tariffs” marks a shift in U.S. trade policy from “unilateral tariff hikes” to a “systematic restructuring of the global tariff system.” It also signifies a shift from a multilateral framework to a bilateral or regional one. The fundamental goal is to use this as a tool to restructure the international trade system and rewrite global trade rules so that they are centered around the United States.
YU Xiang: Confident that China’s Economy Is Prepared for the “Trump Shock”
U.S. Tariffs: Two-Way Impact and China’s Flexible Response
The biggest concern about Trump’s return is the possible revival of aggressive tariffs on China. However, past experience shows these measures backfired. China swiftly adapted by upgrading exports and diversifying markets, easing much of the pressure. Meanwhile, U.S. tariffs fueled domestic inflation and public discontent. This proves that tariffs are a double-edged sword — and China is now better prepared for future confrontations.
Supply Chains: Accumulated Advantages Not Easily Replaced
Another key focus of Trump’s policy is pushing for a restructuring of global supply chains to reduce dependence on China. However, China’s role in the manufacturing supply chain remains pivotal. Its complete infrastructure, efficient production capacity and massive domestic market provide it with an enduring edge over alternative countries like Vietnam and India, which still lag significantly. At the same time, China continues to improve its business environment and upgrade domestic supply chains — making a full-scale “decoupling” from China unrealistic in the short term.
Domestic Demand as a Foundation: Proactive Fiscal Policy to Protect Growth
Amid rising external risks, China is shifting toward domestic demand as a long-term growth anchor. The 2022–2035 strategy prioritizes consumption, with retail sales rising 7.2% in 2023 to over 47 trillion yuan. The 2024 year-end economic meetings stressed “extraordinary counter-cyclical regulation” through coordinated fiscal and monetary policy. Under U.S. pressure, China is building a self-reliant, demand-driven growth model to reduce export dependence and boost confidence.
Investment in Science and Technology: Self-Reliance Against Tech Containment
As the U.S. continues to restrict China’s access to core technologies, Beijing regards technological self-reliance as a key defensive strategy. This is not a short-term reaction, but a long-term strategy to reduce dependence on Western technology — the very weakness that the U.S. seeks to exploit.
Market Diversification: Reducing Dependence and Spreading Risk
Alongside responding to the U.S., China is actively expanding its international economic ties to mitigate the risks of relying on a single market. The Belt and Road Initiative (一带一路) and the Regional Comprehensive Economic Partnership (RCEP 全面经济伙伴关系协定) have reinforced China’s role in the regional value chain, particularly in Southeast Asia. In 2024, high-level visits to Africa and Latin America boosted bilateral cooperation in strategic sectors such as infrastructure, energy, and technology. Southeast Asia remains China’s largest trading partner, while Germany and Singapore are among the countries that significantly increased investment in the Chinese market this year.
ZHANG Weiwei: China Was Well-Prepared for Trump's Global Tariff War
The U.S. is poised to sustain greater losses than China in the tariff dispute
During Trump’s first trade war, about 90% of tariff costs fell on U.S. consumers and businesses. A second round would likely yield similar results due to U.S. reliance on Chinese goods. Years of neoliberalism and deindustrialization have made the U.S. more dependent on China, amplifying its losses. Meanwhile, Biden has sanctioned over 140 Chinese firms, targeting chips and semiconductors. In response, China imposed strict rare earth export controls, including bans on re-exports via third countries, dealing a heavy blow to the U.S. Future Chinese actions depend on whether U.S. sanctions are lifted.
The EU should resolutely safeguard its interests and differentiate between its internal affairs and China-Serbia relations
It is Donald Trump’s established pattern to employ threats as a prelude to negotiation and agreement. This behavior suggests advantages for strong leadership and powerful nations. A perceived display of weakness by the EU could prove detrimental. The EU must assert its position in the face of the U.S., emphasizing the defense of its interests. Every nation and international entity is obligated to uphold its sovereignty and interests. Furthermore, the EU should differentiate between its internal matters and the economic and trade relations between China and Serbia, recognizing their distinct nature. The China-Serbia relationship operates independently of the EU, rooted in historical ties from the Yugoslav era to the present, and the EU should respect the sovereignty of both Serbia and China.
ZHENG Yongnian: China and the U.S.: Competing for Economic Resilience
The rivalry between China and the United States focuses on economic resilience, with technology and trade serving as the primary battlegrounds. While tensions extend into geopolitics and ideology, the competition’s essence lies in economic and technological dominance. China has moved away from neoliberal economic models and import-driven growth, prioritizing self-sufficiency in critical technologies. By fostering a unified domestic market and pursuing high-level global integration, China aims to build a modern industrial system capable of withstanding external pressures.
The Flawed Logic and Risks of Reciprocal Tariffs
The Trump administration’s reciprocal tariffs were designed to achieve multiple objectives: increasing short-term fiscal revenue, reducing domestic income taxes, and incentivizing the repatriation of manufacturing to revive U.S. industrialization. These measures therefore resonated with segments of the American public. However, critics argue that such tariffs risk triggering economic stagnation or even a new “Great Depression,” dismissing the feasibility of large-scale reindustrialization.
Global Repercussions and Divergent Responses
The ripple effects of reciprocal tariffs have unsettled the global economy, leaving nations to grapple with whether these measures are tactical maneuvers or enduring policies. Reactions vary based on strategic calculations: weaker economies concede; those seeking U.S. concessions compromise; security-dependent allies align with Washington; and peer competitors, like China, retaliate in kind. This dynamic highlights a world order in which power dictates responses, exposing the vulnerabilities of less resilient economies.
China’s Strategic Approach: Balancing Resistance and Adaptation
China has countered U.S. tariffs by exposing their unilateral and coercive nature while safeguarding its legitimate interests. The past decade has underscored critical lessons: rejecting dependency on foreign technology, investing heavily in indigenous innovation, and deepening structural reforms to unify domestic markets. As the tariff war evolves, China remains vigilant—not only toward U.S. policy shifts but also the enduring adaptability of American capitalism, which is often underestimated. Especially, China must guard against the Western media's narrative trap of weaponizing “Chinese gains” rhetoric to pressure Trump and instigate confrontation, while acknowledging that domestic complacency risks strategic vulnerability. National rejuvenation hinges on self-reliance, not adversaries' miscalculations.
Conclusion
The renewed trade war—intensified by unilateral policy shifts, nationalistic rhetoric, and mutually punitive tariffs—has ushered in a period of extreme uncertainty in global markets, strained supply chains, and reshaped international trade norms. The economic, geopolitical, and strategic implications of this standoff are likely to reverberate far beyond its two main actors. Trump’s unilateral tariffs may have their own underlying political significance, yet a sustainable economic environment requires cooperation, predictability, and mutual respect.
Writers and Editors for Today’s Newsletter:
Writers：WEN Yiran, WANG Jingyi, Ngoc(Jade) Bui, PEI Yutong, and XIAN Ruilian
Editors：SUN Chenghao, ZHANG Xueyu, BAI Xuhan and Hannah Shirley
