he ongoing tariff standoff between the United States and China has shaken the global economic market to its core. US President Donald Trump has taken the trade war with Beijing to another level, imposing tariffs on hundreds of billions of dollars’ worth of goods. China has retaliated in the same vein and the clash of economic titans has extended well beyond the two nations.

While these states clash, questions linger about the long-term implications for globalisation, inclusive multilateral trade agreements and economic stability.

During the 1970s, the Chinese government embarked on a long-term economic reform process under the leadership of Deng Xiaoping. Private industries began to grow and capitalise. China joined the World Trade Organisation in 2001, committing to several economic reforms including sheer tariff cuts for imported goods, protections for intellectual property and greater transparency in its laws and regulations. President Bill Clinton saw a lucrative opportunity for the US in inviting China into the global trading system.

The roots of the first trade war go back to the time when China was accused of malfeasance in trade practices including intellectual property theft allegations and forced technology transfers. In 2016, Donald Trump publicly criticised Beijing’s trade practices. The following year, having taken office, he imposed heavy taxes on Chinese imports ranging from metallurgy to electronics and clothing. China retaliated and in no time the tit-for-tat escalated into a full-fledged trade war. By 2019, Washington had levied over $360 billion worth of Chinese goods. China had imposed tariffs on $110 billion worth of American products.

On February 3, 2025, President Trump announced his Reciprocal Tariff Policy for many countries, including China. This laid the foundation for raising taxes on imports from countries in accordance with their balance of trade with the USA. Although, the baseline was 10 percent, on April 2, Washington levied 34 percent additional tax on Chinese imports, in addition to 20 percent on existing duty resulting in 54 percent overall. China retaliated with a 34 percent tax on US goods. Trump then raised the tariff to 84 percent; so did Xi Jinping. The White House then announced a 125 percent tariff on Chinese imports. The Great Hall of People then stated that it would not respond to further tariff hikes. Nevertheless, Trump then imposed the never-heard-before tax of 145 percent on Chinese imports.

Trump says that the USA has imported a lot of goods from China but Beijing has not returned the favour. Washington is apparently also concerned about national security as it relies heavily on Chinese electronics, pharmaceutical ingredients and rare earth metals. Beijing has already suspended critical rare earth exports. The US companies don’t have a ready alternative supplier.

China’s pivotal option revolves around the US debt. China uses its control of US debt as its main nuclear response. China today owns $760 billion worth of United States financial instruments. It is the second largest holder of US debt.

China’s pivotal option is its stock of US debt. China currently holds $760 billion worth of United States financial instruments. It is thus the second largest holder of US debt. Theoretically, Xi can sell the bonds cheap and cause a devaluation of the dollar. There’s no indication so far that China will make such a move. If it did, it could make Chinese exports more expensive. However, international trade operations will face a disruption in the event because such measures produce unpredictable conditions for export businesses. Chinese manufacturers and US exporters in critical industries will suffer increasing pressure from these economic actions.

According to the International Monetary Fund, together China and US have a 43 percent share of the global economy. An all-out trade war will not only slowed economic growth or push them into recession but also have serious repercussions for other countries. China is currently the biggest manufacturing country in the world. It exports more than it imports as it produces more than it consumes. Steel is one such example. If Chinese products cannot sell in the US market, Beijing will have to dump those elsewhere. This could bring prosperity for some but it could also threaten jobs and wages.

EU and the UK seem to be in a pause. Reports from US say formal channels have been opened with India, Japan, South Korea, Cambodia and Vietnam. It is a complicated picture. Many countries, especially in the Asia-Pacific region, are integrated quite well into the Chinese trade system. However, no one wants to disparage USA.

The early phase of the US actions will yield increased prices for goods in stores and kitchens throughout the United States and China. The United States people will see higher prices for the same products. Chinese companies will face diminished sales and eventually smaller profits. The economic productivity of both these nations decline. The political leaders will ultimately stop the trade war following some negotiation.

The BRI initiative and other strategies have helped China expand its international power base. However, these have also led to reservations about potentially excessive reliance on Cinese investment. Destructive trade penalties have caused disruptions to supply systems that led China to develop sustainable commercial activities that produced unexpected ecological advantages. The developing trade environment will likely be driven by techno-nationalism strategies that prioritise domestic technology control for strategic planning and by regionalisation trends. International organisations, led by the WTO, will lead the way in developing negotiations while settling trade conflicts. The successful resolution of these obstacles demands a partnership between stakeholders, flexibility and a steady dedication to sustainable expansion in an economy that continues to divide across regions.

The writer is based in Lahore. She can be reached at areebaharoon4330@gmail.com