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U.S.-China Trade War Reignites: Who Holds the Advantage in the New Tariff Offensive?
U.S. tariffs on China reignite trade war as Beijing retaliates; experts weigh impact on global markets and economic power balance.
Author: Saurav Kumar
Published: 15 hours ago
The United States recently imposed a new round of tariffs on Chinese imports, reigniting tensions between the world’s two largest economies and prompting fresh debate over the trajectory of their economic rivalry. As Beijing prepares its response, analysts are watching closely to see whether China’s reshaped economic model—bolstered by domestic growth and global diversification—can better withstand pressure than in previous trade rounds. The renewed escalation has sparked debate over whether Washington’s strategy might ultimately trigger greater economic fallout at home than abroad, especially amid mounting global uncertainty.
As part of the ongoing trade war, U.S. President Donald Trump has placed tariffs of up to 145% on Chinese goods. In retaliation, China has hit back with tariffs as high as 125% on U.S. products.
The International Monetary Fund (IMF) has lowered its global growth forecast, citing trade tensions as a major factor, and warned that the U.S. economy may bear the brunt of the fallout.
China’s Strategic Pivot: From Dependency to Diversification
In the aftermath of earlier trade clashes, Beijing has spent the past decade systematically reducing its economic reliance on the U.S. By strengthening ties with the Global South and forging regional trade agreements—most notably the Regional Comprehensive Economic Partnership (RCEP)—China has diversified its export markets and supply chains, creating a buffer against external shocks.
Complementing this external diversification, Beijing’s Dual-Circulation Strategy (DCS)—which emphasizes internal consumption alongside exports—has further increased China’s economic resilience. The country is exporting more value-added and high-tech products, giving it a competitive edge even amid rising trade restrictions.
To reinforce economic stability amid growing external pressure, China has also taken proactive steps in its financial markets. In recent weeks, state-backed investment groups—often referred to as the “national team”—have intervened to stabilize equity markets, particularly in sensitive sectors like technology. Analysts say these efforts aim to preserve investor confidence and momentum as tensions escalate. “The first battleground of the tariff war is financial markets, especially stock markets,” said Ting Lu, Chief China Economist at Nomura, speaking to the Financial Times. “China’s response underscores a broader strategy to maintain investor confidence and economic momentum, even under pressure.”
Skepticism at Home: Americans Wary of Tariff Fallout
Back in the U.S., support for tariffs appears to be waning. According to a Pew Research Center survey conducted on March 24–30, 52% of Americans believe additional tariffs on China would negatively affect the U.S. economy, while only 24% see potential benefits.
The survey highlights a deep partisan divide:
- 44% of Republicans support the tariffs,
- Just 5% of Democrats agree,
- 80% of Democrats consider them harmful.
When asked about personal impact, 53% of Americans said they expect to be hurt financially by the tariffs. Only 10% anticipate any benefit.
Escalation Dominance: Who Holds the Upper Hand?
Some experts argue that U.S. leaders may be overestimating their leverage in this renewed trade confrontation. “Some analysts, like former Bank of England policymaker Adam Posen, argue that China holds escalation dominance, pointing to continued U.S. reliance on Chinese supply chains.”
“The U.S. still depends on Chinese goods that are not easily replaced or domestically produced without prohibitive costs”, he added.
As trade tensions escalate, the global economic influence of both the U.S. and China has undergone a notable shift.
The Shift in Global Trade Gravity
In the year 2000, the United States was the undisputed hub of global trade, serving as the primary trading partner for a vast network of countries across the Americas, Africa, Asia, and Oceania. It served as the top trading partner for over 70 countries. But by 2020, that role witnessed a transition.
Image Source: Visual Capitalist
According to IMF data visualized by Visual Capitalist, there is a dramatic shift in trade influence, with China now serving as the top partner for over 120 nations, particularly in Asia, Africa, and Latin America.
Image Source: Visual Capitalist
China’s trade footprint is now deeply rooted in Asia, Africa, Latin America, and parts of Europe—regions that were once more closely aligned with U.S. markets.
While the U.S. may seek to assert leverage through tariffs, it risks taxing its own consumers, aggravating inflation, and straining industries dependent on Chinese imports. In the emerging multipolar trade era, analysts suggest that China’s economic recalibration may reduce the impact of future U.S. tariffs, signaling a shift in the underlying rules of global trade engagement.
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