What Impact Will the China–U.S. Trade War Have on the Global Economy?
The White House announced that starting Wednesday, April 9, President Donald Trump will impose an additional 84% tariff on all imported goods from China. This would bring the total tariffs on Chinese exports to the U.S. to at least 104%, pushing the U.S. and China to the brink of a full-scale trade war.
In response, China stated it would "fight to the end," refusing to yield to what it sees as American coercion. Beijing has already implemented countermeasures, raising its own trade barriers against the U.S.
So, what impact could this escalating trade conflict have on the global economy?
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Last year, the total value of goods traded between China and the U.S. reached approximately $585 billion (£429 billion). Of that, U.S. imports from China amounted to $440 billion, while exports to China totaled only $145 billion. This created a U.S. trade deficit of $295 billion with China in 2024—about 1% of the U.S. GDP.
While this is a large figure, it’s still far below the $1 trillion figure repeatedly claimed by Trump this week.
During his first term, Trump had already imposed heavy tariffs on China. His successor, Joe Biden, maintained and even expanded these tariffs. As a result, the share of U.S. imports coming from China dropped from 21% in 2016 to 13% last year—indicating a decline in America's dependence on Chinese trade over the past decade.
However, analysts point out that some Chinese exports to the U.S. have simply been rerouted through Southeast Asian countries.
For instance, in 2018, the Trump administration imposed a 30% tariff on Chinese solar panels. But by 2023, the U.S. Department of Commerce found evidence that Chinese solar manufacturers had moved their assembly operations to countries like Malaysia, Thailand, Cambodia, and Vietnam—then exported the goods to the U.S. from there to circumvent tariffs.
As a result, the U.S. plans to impose “equivalent” tariffs on those countries, which would raise the cost of Chinese-origin goods that still end up in the U.S. market.
In 2024, the top U.S. export to China was soybeans—primarily used to feed China’s 440 million pigs. Other key exports include pharmaceuticals and petroleum products.On the other hand, China's exports to the U.S. consist mainly of electronics, computers, and toys, as well as a large volume of batteries—which are crucial for electric vehicles.
The largest category of U.S. imports from China is smartphones, making up 9% of total imports. A significant portion of these are produced by American tech giant Apple through contract manufacturing in China. The U.S. tariffs have been a key factor in Apple’s stock market value dropping—its share price has fallen 20% over the past month.
These Chinese-made goods, exported to the U.S., were already more expensive due to the Trump administration’s existing 20% tariffs. If tariffs rise to 100%, the impact on American consumers could be five times greater.
Similarly, China’s retaliatory tariffs on American goods will make them more expensive in the Chinese market—hurting Chinese consumers. In addition to tariffs, the U.S. and China have other tools to inflict economic damage on each other through trade.
China dominates the global refining of critical metals, including copper, lithium, and rare earth elements. Beijing could restrict exports of these materials to the U.S.—just as it has already limited exports of germanium and gallium, which are widely used in military thermal imaging and radar technologies.
Meanwhile, the Biden administration has launched a tech blockade against China, restricting the export of advanced microchips vital to areas like artificial intelligence—chips that China still cannot produce domestically.
This week, Trump's trade advisor Peter Navarro also said the U.S. may pressure countries like Cambodia, Mexico, and Vietnam to limit trade with China if they want to continue exporting to the U.S.
According to the International Monetary Fund (IMF), China and the U.S. together account for around 43% of global GDP in 2024. If these two economic giants enter a full-blown trade war, it could slow their economic growth—or even trigger recessions—dragging down the global economy with them. Worldwide investment may also be negatively impacted.
There are other potential consequences too. China is the world’s largest manufacturing nation, with far more production capacity than it needs for domestic consumption. Its trade surplus in goods is now close to $1 trillion, meaning its exports vastly exceed its imports.
Many Chinese goods are produced below cost thanks to government subsidies and low-interest loans—steel being a typical example. If these goods can no longer be exported to the U.S., Chinese companies may attempt to dump them in other markets. While this might benefit consumers, it could harm local manufacturers and threaten jobs and wages in those countries. The UK Steel Association has already warned that China’s surplus steel may be redirected to the British market.
In summary, if a full-scale China–U.S. trade war breaks out, the spillover effects would reach every corner of the globe. Most economists believe the consequences would be overwhelmingly negative.
