Prospects of Sino-US Trade War in New Trump Era!
Shahzad Masood Roomi
What Trump’s 2nd tenure will usher for global politics and trade? This question has been asked frequently
since the results of US presidential elections announced. With the announcement of Trump’s victory, the
debate about a second round of tariffs war between world’s largest trading partners has gained new
traction and it’s not without reasons. President elect Donald Trump has well-known position about the
revival of US local industry and minimizing Chinese influence in the US market. He took some serous
steps in this direction during his previous term as the US president from 2016-2020.
Thought out his election campaign, Trump has promised to make America great; his political vision in
which the US must manufacture goods within the US instead in China. He promised to take measures to
incentivize local industry, put heavy tariff on Chinese products, and reduce reliance on imports overall.
He believes that Chinese inclusion in WTO at the beginning of 21 st century has allowed Beijing to
manipulate the WTO terms to bypass free market practices and Chinese industries have given protection
from Beijing to gain competitive edge in trade with the US. There has been argument against this
argument as well but now as Trump is back in White House, he will fulfill his political vision. As many US
brands have their manufacturing facilities in China, any tariff war will harm these businesses who have
supply chain network across the world. Hence, any trade war between China and the US is not merely a
bilateral issue and demands close examination of possible outcome of any such eventuality in near
future.
President Trump's aggressive "America First" policy could lead to increased tariffs which could trigger a
reciprocal response from China leading to a renewed trade war which in turn will result higher consumer
costs for the same goods which are now available at lower prices. Any such outcome of President
Trump’s likely actions will certainly disrupt the global supply chains and impact various industries,
including technology, automotive, industrial manufacturing, consumer goods, and agriculture. For
example, if Trump imposes a 60% tariff on Chinese goods and 20% tariff on all imports, as he promised to
do many a time during his election campaign, several key industries in China would be significantly
affected.
Most important sector where the US and China are going to compete in the 21 st century is the tech
sector particularly semiconductor design and manufacturing, electronics, and related systems. Already
Taiwan, under the US demands, has announced to drop China off from potential customers of its AI-
enabled microchips, even though China remained Taiwan’s largest chip buyer for decades. Increased
tariffs on Chinese made electronic devices will increase the cost of business for Chinese manufacturers
and consumers of these items in the US both.
The automotive industry, which is deeply integrated into the global supply chain, is another sector that
would face increased costs under the 2 nd tenure of President Trump. Not only Chinese EV sector but the
US based automakers like Tesla, which depend on Chinese parts, would see higher prices and potential
disruptions.
Similarly, ripples of Trump’s trade war with China will be felt by large scale engineering and
manufacturing sectors. This includes sectors like steel, non-ferrous metals, and fertilizers. These
industries are already sensitive to global trade dynamics and would likely see reduced output and
increased costs. Such measures will affect the US consumers of the Chinese goods who have now
become accustom to cheaper imported many consumer goods, from clothing to electronics, which are
mainly produced in China. Higher tariffs would lead to increased prices for these products, affecting both
Chinese manufacturers and global consumers. So, in the end, Trump will be affecting own people more
than Chinese who also have the entire world as open market.
Trump’s trade war will put US brands with Manufacturing in China in the most challenging position as
they had to take some drastic measures in very short span of time to mitigate or minimize the impact of
this trade war.
Some of these steps are mentioned below. Not all the businesses can take each step, but few of these
will have to taken in order to survive in the competitive market where Chinese local brands are eager to
replace these US based brands.
The most obvious step which even Trump wants US brands to take is the relocation i.e. moving
operations to countries with lower tariffs like India or ideally back to the US. Brining back manufacturing
to the US has been Trump’s political slogan since his first tenure. Second option which large scale brands
can afford is absorbing higher costs to maintain pricing strategies and passing on increased costs to
consumers. Trade war is going to affect the US brands that are not even located within China by
disrupting the supply chain networks where many components of their plants and machines comes from
China at very low cost. Such business will have to readjust the sourcing of components by seeking
different suppliers than China. Some businesses may have to redesign their products with fewer
components subject to tariffs increases. Finally, US brands may have to diversify revenue streams so that
they can absorb the impact of increased tariffs without passing them on to consumers and losing
competitiveness in the market.
Trump believes that his tariff strategy could potentially benefit local US businesses and manufacturing by
boosting domestic production and by encouraging consumers to buy American-made products. He firmly
believes that his actions will trigger increased capital investment in domestic production facilities and
consequently triggering supply chain reshoring i.e. bringing supply chains back to the US. Trump is
confident that his strategy will enhance innovation and competitiveness in the US industry by pushing
businesses to invest more in research and development to improve products.
Trump’s trade war with China cannot be discussed without analyzing the China's potential responses.
Beijing may impose retaliatory tariffs on US goods. China can also impose stricter regulations and
customs delays which is a form of non-tariff barrier. Currency devaluation is another weapon China may
employ which will make Chinese exports cheaper and more competitive. US already blames China for
doing it to penetrate European and American markets. But most strategic weapons China hold in big tech
sector is to restrict rare earth exports to the US which will disrupt the critical supply chain of the US.
Entire US weapon manufacturing sector depends on it.
These measures could lead to increased tensions and further disruptions in global trade and even
geopolitics. Already China and the US are at odds with each other on the issue of Taiwan. Trade war will
only exacerbate these issues. More than Chinese and US businesses, such a conflict will affect the entire
global trade and supply chain networks which are still healing from the impact of COVID. Trumps trade
war is a bad omen and must be discouraged!
