Trump 2.0: His Trade War, China And Implications For The World – OpEd

President Trump has taken a huge policy shift by imposing tariffs and calling it as ‘Liberation Day’ in his April 2 speech. He has announced imposing 10 percent baseline tarrif on all imports into America from all trading partners. This is second time that Trump has initiated trade war and has imposed tariffs on more than 100 countries, blocs and territories. The most pertinent tariffs are on China which were 125 percent which were escalated to 245 percent on April 16.

Meanwhile, China has retaliated back in a tit-for-tat move by imposing 125 percent tariffs. It has banned the US companies who are mostly defense companies. In addition, the EU has also retaliated with tariffs on the US goods. 

What will be the impacts of these tariffs on China whose bilateral trade with the US is currently 688.28 USD dollar is a hot debate. Tradingecomies writes that Chinese trade surplus was 104.84 USD billion in December 2024. While, the BBC writes that on April 7 Trump said we have 1 Trillion trade deficit with China. The BBC called it exaggeration and mentioned official figures as 295 USD billion. 

As far as effects on Chinese economy are concerned, China will be the major gainer in this war as it has already established trade alliances with its mighty BRI (Belt and Road Initiative). On the other side, undoubtedly, future lies with East and China has warm economic and trade relations with majority of Eastern countries.
Recently, Xi Jinping visited Malaysia and will visit Cambodia for enhancing economic cooperation in the South East Asia. These states are badly hit by the US tarrifs. President Xi also signed a slate of agreements with his Vietnamese counterpart To Lam and urged him to jointly oppose unilateral bullying. 

On the other hand, Chinese economy will be affected too. The BBC reports, “Trump already imposed significant tariffs on China in his first term as president. Those tariffs were kept in place and added to by his successor Joe Biden. Together those trade barriers helped to bring the goods the US imported from China down from a 21% share of America’s total imports in 2016 to 13% last year.”

Eiu.com estimates that our baseline forecast assumes a 20-percentage-point increase in the effective tariff rate on Chinese exports to the US, reducing China’s GDP by about 0.6 percentage points from 2025 to 2027. Set asiding these calculations, being a gigantic economy, China exported 1 USD Trillion more goods than it imported in 2024 all over the world. Though, the US tariffs will not affect China severely, but it will definitely slow down its economic growth.

Insofar as consequences of trade war on America itself are concerned, though trade imbalance of the US with China will reduce but on the flip side, it has also brought negative impacts yet. For instance, the US stock exchange bearished with the announcement of tariffs and its two_day loss was 6.6 USD Trillion which was the biggest lost in history of US market. In addition, with these tariffs commodities prices will rise for US consumers. Renowned Pakistani economist Yousef Nazar estimated that such a steep rise in tariffs could impose an extra cost of at least $3,400 on the average US household, potentially ushering in a period of stagflation. The leadership thought. rbc.com writes that, ” We estimate that inflation could increase by 50 bps by year-end if tariffs are enforced beyond 3 months.”  

In addition, Yousef Nazar quotes Nouriel Roubini who recently tweeted, “Trump’s tariffs are a recipe for disaster. They’re arbitrary, punitive, and destined to stifle innovation while sending inflation through the roof”. 

Renowned Pakistani economist Mahfooz Ali Khan observes this will negatively affect the US economy rather than Chinese. He said that, “China national debt is nominal but US debt is 130% of GDP. Any further increase is going to be disastrous. Any trade deficit is due to trade diversion with increase budgetary gap. Due to increased tariff from China on Agriculture exports, food inflation will cause price increase.” 

Analysts are predicting rise in revenue for the US. JPMorgan.com writes that, “By our calculations, this takes the average effective tariff rate from around 10% to just over 23%,” Feroli said. The new tariffs could raise just under $400 billion in revenue, or about 1.3% of U.S. GDP, which would be the largest tax increase since the Revenue Act of 1968.” The leadership thought. rbc.com further forecasts that on 2024 import data from Canada, Mexico, and China, the announced tariffs could boost total U.S. tariff revenues by about $300 billion, assuming demand remains unchanged. The ultimate boost to revenue is likely to be smaller than the $300 billion noted above, considering reduced demand and potential substitution effects.

Apart from this, most probably, withdrawal of foreign investment in America is possible. China who is investing in the US will stop investment in the presence of such huge tariffs. The US manufacturers sector needs investment. On the other side, China that exports chemicals, pharmaceuticals, paper products and textiles_ its reciprocal tariffs will have huge impact on this sector.

On the other side, the US has lost political battle as economic success depends on warm political relations with other countries. This move of Trump will ultimately diminish the US influence on states owing to the reality that Trump has eventually hit their interests by imposing tariffs.

Despite China and US, these tariffs could have far-lasting implications on the World economies too. It might possibly cause global recession in the midst of trade war between Two gigantic world economies and the EU. The move will alter and shift Global economy. Price of commodities might rise, regional alliances will be established,  De-dolarization might take place and trade diversion is expected to happen. The WTO forcasted that owing to the US tarrifs, reciprocal tarrifs and political uncertainty world economy will shrink. While, the BBC writes that,” The WTO previously expected global goods trade to expand by 2.7% in 2025 but it now forecasts it will fall by 0.2%.”

The BBC also writes that, “The US and China together account for such a large share of the global economy, around 43% this year according to the International Monetary Fund.” It means global economy is mainly dependent on these two states. Consequently, their bilateral trade war will affect global economy as tarrif Vs tarrif means increase in cost of goods and reduction in trade.

These tariffs are death to the WTO (World Trade Organisation) and the GATT (General Agreement on Trade and Tariffs) who are proving that might is right in running the affairs of these two organisations. These two organisations have failed to overcome trade barriers. 

Astonishingly, on April 9 Trump took U-turn and paused tarrifs for three months on 75 trading partners while, tariffs remained active for China. Whereas, the 10% global tariff will remain in place.

Trade war has no winner rather all are losers. A win_win and ideal situation is when humanity wins. When focus is given to shared opportunities, productive competition, cooperation and when 
peaceful co_existence is preferred over individual and nation,s interests. This is the century of interdependence when protectionism doesn’t fit in the scenario. It might help in temporary political gain and might pump soul in economies for short_terms but it doesn’t work permanently.

Free, fair and open global market is beneficial for all and there is a dire need when two mighty powers_ China and US work on nenotechnology, quantum computing, biotechnology and AI for the sack of humanity rather than engaging in trade war and creating barriers. The responsibility is on the shoulders of Trump who has initiated this war.