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Trump’s New Trade War with China

In recent weeks, the global trade landscape has once again been shaken by dramatic tariff announcements from the Trump administration. While reminiscent of the initial U.S.-China trade conflict during Trump’s first term, the current measures signal a notably different strategic approach and a swifter, more robust Chinese counter-response. This column examines the key differences between the two phases, provides statistical insights, and discusses the potential ramifications for global markets.

A New Chapter in Tariff Policy

On April 2, 2025, then-President Trump imposed a series of high tariffs on various countries—with the highest reaching 49% on imports from Cambodia and 48% from Laos. Notably, a 34% tariff was levied on Chinese goods. In stark contrast, during the first phase of the U.S.-China trade war (roughly 2018–2019), although the initial tariffs were aggressive, China’s response was more measured. At that time, China neither immediately retaliated at full scale nor refrained completely from accommodating U.S. demands, partly because it was simultaneously grappling with a severe real estate crisis in China. The domestic economic fragility made a rapid escalation in trade hostilities potentially untenable.

The Chinese Response: A Much Sharper Countermove

Unlike the earlier phase in 2018, China’s response to the new tariff impositions in 2025 was swift and formidable. On April 4, 2025, the Chinese government announced a countermeasure of a 34% tariff on all U.S. imports, effective April 10, as reported by the official Xinhua News Agency. Additionally, China has placed U.S. defense contractors and certain Taiwanese-linked American companies on a blacklist, and it has taken bold steps to restrict exports of rare earth elements.

Statistics at a Glance: China’s Dominance in Rare Earths

Reserves: Approximately 50% of the world’s total reserves

Global Mining Output: Around 60%

Processing Capacity: Roughly 87%

These figures underscore China’s pivotal role in the rare earth elements market—materials that are critical for high-tech manufacturing, including semiconductors and electronics—and highlight the leverage China can exert in strategic trade relations.

Figure 1: China dominates the rare Earth Market

Accordingly, President Trump continued his aggressive stance by warning that if China does not withdraw its retaliatory tariffs, an additional 50% tariff will be imposed starting April 9th, 2025.

In response, just nine hours earlier—on April 8 at 16:00 Chinese time—China’s state-run Xinhua News Agency announced a new countermeasure to Trump’s 50% tariff threat. Unlike the first U.S.-China trade war in 2018, China’s reaction this time was remarkably immediate.

“Considering the frequent occurrences of avian influenza in the United States, Chinese authorities have recommended banning U.S. poultry imports to ensure the safety of its citizens’ food supply.” Since 2019, poultry from 172 U.S. facilities has been exported to China, amounting to approximately $722 million in chicken exports and $71 million in turkey exports annually. In the U.S., poultry production is concentrated mainly in the southern and midwestern states. Key production regions include:

Georgia: The largest poultry production hub in the United States, especially renowned for broiler chicken production. Georgia hosts large-scale broiler farms and processing facilities, making it a central pillar of U.S. poultry production.

Alabama: Alongside Georgia, Alabama plays an important role in broiler production and has well-developed poultry processing and feed industries.

Missouri: This state is notable not only for broiler production but also for egg production, with robust agricultural activity related to poultry.

Arkansas: As the second-largest poultry producer in the United States, Arkansas is home to numerous poultry farms and processing plants.

North Carolina: Known for both poultry production and processing, North Carolina stands out for its chicken and egg output.

States such as Alabama, Missouri, and Arkansas represent key regions for Trump’s electoral base.

“As the United States threatens to impose an additional 50% tariff on China, the Chinese government is contemplating halting its fentanyl cooperation with the United States.”

“China is also considering a range of countermeasures in the service trade sector, including restricting U.S. companies’ participation in the Chinese market procurement, and limiting cooperation in areas such as legal advisory services. Given that the United States has maintained a long-term surplus in service trade with China, the implementation of ‘reciprocal tariffs’ could pose a severe threat to the exports of American service industries. Additionally, there have been discussions about banning the import of American films and investigating the intellectual property income of U.S. companies operating in China.”

Followed by its announcement of countermeasures, the Chinese spokesperson concluded with these remarks:

"The China of today is not the China of 100 years ago, nor is it the China of 40 years ago – and certainly not the China of just 4 years ago. The storm brought on by the United States’ tariff war has only just begun."

President Trump would be gravely mistaken to expect that China will simply capitulate and listen to American demands, as it did during the first U.S.-China trade war seven years ago. Unlike that earlier period—when China, grappling with an unmanageable real estate crisis, could ill afford a sharp contraction in its domestic economy—today’s Chinese government has, over the past several years, systematically phased out the financially weak companies that precipitated the real estate debacle. Moreover, China now has the option of countering tariffs gradually through devaluation of the yuan.

It is also important to consider that while U.S. exports accounted for roughly 19% of China’s total exports in 2018, this figure is projected to fall below 3% by 2025. This dramatic shift implies that the disruptive impact of U.S. tariff measures on the Chinese economy is now considerably more limited than it was during the earlier trade conflict.

Additionally, historically high price-to-earnings ratios (PER) among American big tech firms have long raised concerns about an AI bubble. The tariff measures announced on April 2 by President Trump reportedly wiped-out hundreds of trillions of dollars in market value, driving U.S. stock markets into a precipitous decline of 20–30%—a downturn that some analysts have compared unfavorably even with those experienced during the 9/11 attacks or the 2008 financial crisis.

Further emphasizing the evolving technological landscape, the “AI Index 2025,” released on April 7 by Stanford University’s Human-Centered AI Institute (HAI), revealed that the gap in AI technology between the United States and China had narrowed to just 1.7% as of February 2025. This rapid closing of the gap—shrinking from nearly 10% just a year ago—underscores a significant technological convergence. As today’s Chinese spokesperson stated, it is crucial to remember: the China of today is unequivocally not the same as the China involved in the first U.S.-China trade war in 2018.