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Avishka Ashok
25 September 2025 |
In the news
On 20 January 2025, the US President Donald Trump claimed the office of the President of the US after he was elected to a non-consecutive second term in 2024. On 1 February, the White House reported that President Trump’s administration will be implementing a ten per cent tariff on imports from China, in an attempt to counter the threats posed by illegal aliens and drug trafficking.
On 4 February, China’s Ministry of Finance announced the implementation of ten per cent tariffs on imports of crude oil, agricultural machinery, large-displacement vehicles and pick-up trucks from the US.
On 4 March, the US doubled the tariffs on imports from China to 20 per cent and on 8 March, a 25 per cent tariff was imposed on steel imports. On 3 April, the 25 per cent tariffs were extended to the automobile industry. In retaliation, China scaled up export control on essential metal products and technologies and imposed a ten per cent tariff on sorghum, soybeans, pork, beef, seafood, fruit, vegetables and dairy products and a 15 per cent tariff on chicken, wheat, corn and cotton.
On 10 April, China cranked up its response for the second time since the US’ unilateral tariff hike and imposed an 84 per cent tariff on all imports from the US. The Chinese Ministry of Commerce promised to follow through to the end and stated, “Pressure, threats and blackmail are not the right way to deal with China.”
On 11 April, the US exempted electronics such as smartphones, computers, solar cells, memory cards, and semiconductors imports from reciprocal tariffs. On the same day, China raised its tariffs on American goods to 125 per cent. China’s Finance Ministry Spokesperson said: “Even if the U.S. continues to impose higher tariffs, it will no longer make economic sense and will become a joke in the history of the world economy. With tariff rates at the current level, there is no longer a market for U.S. goods imported into China.”
On 13 Mar, both countries reduced their tariffs against each other to ten per cent for a duration of 90 days. However, on 4 June, the US increased its tariffs on steel, aluminium and derivative products to 50 per cent and later extended this tariff to additional derivative products. On 1 August, a 50 per cent tariff was also imposed on copper products. On 12 August, President Trump extended the traffic truce for another 90 days to pre-empt the disruption of supply chains during the holiday season. As a result of this truce, the US tariffs on Chinese products stand at 30 per cent, whereas the Chinese tariffs on American products are at ten per cent.
Issues at large
First, the factors that led to the tariffs escalation. The issue of trade deficit with China is not a recent phenomenon. In fact, as per the US Census Bureau, the trade deficit between the countries in 1985 was recorded at USD six million. As of 2024, despite a drop in US exports to China, the trade deficit stood at USD 295 billion. In the last four decades, China has established itself as the world’s factory, churning out essential semi-finished and finished products for all countries across the globe. By the early 2000s, China established itself as one of the top three trading partners of the US, a position it has continued to maintain even despite the tariff wars.
Second, the allegations of intellectual property theft and forced technology transfer. The US formally launched an investigation against China in 2017. However, the US International Trade Commission (USITC) has been reporting malpractices since 2011. In 2013, the Commission on the Theft of American Intellectual Property released a report, accusing China of being involved in 50 to 80 per cent of the intellectual property theft in the US. The US Federal Bureau of Investigation also released a report titled “Executive Summary: China: The Risk To Corporate America,” according to which the US lost over USD 600 billion annually to property and business secret theft. It is also a factor for the loss of jobs and suppression of innovators in the US.
China’s protection of intellectual property has been witnessing an upward growth, with the country spending over USD 30 billion on licensing fees and royalties in 2017, four times more than it did in the last decade. China’s most recent response to these allegations has been through the release of a White Paper by China’s State Council Information Office on 9 April 2025, which claims that the country has significantly improved the intellectual property protection and strictly prohibits forced transfer of technology. The new policy includes in-depth credit evaluations, establishes guidelines and a dedicated standard for patents and licensing, a revision of the trademark law, and penalizes entities engaging in misconduct.
Third, China’s industrial policies. In 2015, the Chinese government released its ten-year plan to boost its position in the global economy as a high-tech manufacturer by developing ten high-tech industries, including electric vehicles, information technology, telecommunication, AI, robotics and more. The US, along with many other states, view China’s advancement in the technology industry as a national security challenge given the lack of distinction between military and civilian technologies in facial-recognition software, 3D printing, virtual reality systems and autonomous vehicles.
Fourth, geopolitical rivalry. The US government is also perturbed by China’s rapid rise as a world superpower. China’s trade relations with Africa have grown by over 700 per cent since the 1990s. In the 2000s, China extended its support to many Caribbean countries, while the trade reached USD ten billion by the 2010s. Through the One Belt One Road Initiative, China has been increasing its economic and political engagement with countries in Asia, Pacific Islands, Africa and the Caribbean, while also replacing the unipolarity of the US in the international system. Given this geopolitical shift, the US is rightfully hesitant in giving complete control over supply chains in the manufacturing sector.
In perspective
First, the economic implications. Based on a report by the Tax Foundation, the tariffs imposed by Trump and the consequent retaliatory tariffs will impact the US exports by USD 223 billion, as per the 2024 values. China’s retaliatory tariffs hold the potential to slow the US GDP by 0.1 per cent. However, the report predicts that the tariffs also hold potential to increase the tax revenue of the federal government by USD 573 billion in the upcoming decade. The IEEPA tariffs are also expected to bring in an additional USD 1.7 trillion in revenue over the decade. However, the reciprocal tariffs from China stand to reduce the revenue by USD 37 billion and would reduce the revenue relative to China’s current tariffs.
Second, the inflated price of consumer goods. Inflation in the US has remained at a moderate level despite the sudden shifts in tariffs. However, some categories of products, such as home furnishings and recreational gear, have started increasing their prices as Chinese goods become more expensive in American pockets. The increased tariffs forced businesses to shift manufacturing and sourcing strategies, and can cause production delays and price hikes.
Third, diversification of trade partners. Both the US and China recognised the disadvantages of over-dependence on one singular market and have expanded their outreach to diverse markets across the globe. The US is now exploring partnerships with Mexico, Vietnam and other states. Whereas, China has opened its arms in cooperation with India while also strengthening its ties with Africa, Asia and the Middle East.
About the Author
Avishka Ashok is a doctoral scholar at Christ University, Bangalore. Her research interests focus on China, East Asia, and Climate Studies. Her thesis aims to analyse the feasibility and potential for emulating China’s Climate Action Plans.
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