A New Chapter in the U.S.–China Trade War
With Donald Trump returning to the White House, the world once again faces a new chapter in aggressive U.S. trade policy. The tug-of-war between the world’s two largest economies has shifted from harsh rhetoric to reality: massive tariffs, investment restrictions, and growing threats of economic decoupling. However, despite continued U.S. pressure, recent developments suggest that Beijing is no longer merely holding ground—but beginning to adopt a stronger stance.
On June 11, 2025, the U.S. and China agreed to a temporary trade framework in London. This agreement was cautiously welcomed by global markets, viewed more as a tactical pause than a long-term solution. The deal consists of four main points:
- Tariff Adjustments:
The U.S. agreed to simplify its import tariffs on Chinese goods to 55%, comprising a 10% base tariff, an additional 20% for fentanyl-related products, and the rest from previous policies. In return, China lowered its retaliatory tariffs to a flat 10%, down from as high as 125%. - Compromise on Technology and Critical Mineral Exports:
China will resume exports of rare earth minerals and permanent magnets—vital components for U.S. technology and defense. In exchange, the U.S. will ease some restrictions on exports of civilian technology components, though dual-use items (military and civilian) remain banned. - Limited Relaxation and Mobility:
Both countries agreed to reduce export barriers for non-sensitive goods and to ease student mobility. However, restrictions on AI chips and advanced semiconductors remain fully intact. - Agreement Enforcement:
The agreed oversight mechanism remains tentative: quarterly reviews and third-party arbitration under WTO supervision. Unfortunately, the specifics remain vague, potentially becoming a major weak point in the deal.
Unresolved Tensions
Behind this agreement, structural conflicts continue to smolder. From China’s perspective, U.S. export policies, investment bans, and ideologically driven sanctions are not just competition—they are part of a containment strategy. On the other hand, the U.S. accuses China of continued market restrictions, intellectual property violations, forced technology transfers, and massive state subsidies. These are not technical disputes—they are fundamental.
Trump at a Political and Legal Crossroads
Trump now faces a significant dilemma: backing down from tariffs risks appearing weak (“Supreme TACO – Trump is Chickened Out”), while continuing them could trigger a major legal defeat.
In May 2025, the U.S. Court of International Trade ruled that Trump’s global tariffs violated the International Emergency Economic Powers Act. This ruling could undermine the legal foundation of his economic policies and obstruct his trade agenda in a second term.
Xi Jinping: Stable but Facing Pressures
Although Xi Jinping maintains centralized power and a long-term vision, he too faces serious challenges. His state-led growth model is showing signs of fatigue:
- Unemployment above 14%
- Debt-laden, oversupplied property sector
- Weakened private investment
- The “dual circulation” strategy, aimed at boosting domestic demand, risks creating new economic isolation without proper reforms
Economic Impact
United States:
Tariffs intended to protect domestic industries have instead triggered inflation, dampened business confidence, and strained supply chains. Farmers, the auto industry, and electronics face rising costs. The U.S. dollar has weakened, and investor sentiment has turned cautious ahead of the 2026 midterms.
China:
Despite more resilience, China’s economy is also under pressure. Fiscal subsidies and trade diversification help, but structural challenges persist: low household consumption, declining productivity, and wavering foreign investor confidence due to policy uncertainty and political risk.
Technology Rivalry: The Battlefield of This Century
Technology is now at the heart of this geopolitical conflict.
The U.S. remains dominant in semiconductors, AI, and biotech—but its restrictions have accelerated China’s tech self-reliance ambitions.
China is no longer just copying. Companies like Huawei and SMIC are now global innovators, releasing 7nm chips even under heavy sanctions.
China is also building an alternative digital ecosystem in developing countries, challenging Western tech dominance. However, obstacles remain: talent shortages, research inefficiencies, and dependence on foreign components.
A Fragile Peace
The U.S.–China trade war has now entered a more complex phase—beyond tariffs, this is a battle of ideology, technology, and the future of the global economy.
The latest agreement offers only a temporary reprieve. Without robust enforcement, long-term commitment, and real structural reform, the world faces only a calm before the next storm.
The world can no longer afford another lost decade. If both countries fail to use this moment to build a sustainable framework, the consequences could be grave—for them, and for all of us.
