Since 2018, the escalation of tariffs between China and the United States has become one of the most prominent developments in global trade. As the world’s two largest economies, the trade conflict between the U.S. and China has not only disrupted bilateral trade flows but also significantly impacted global supply chains, business operations, and macroeconomic stability. This article analyzes the impact of the so-called “tariff war” from multiple dimensions and offers professional insights and conclusions.
I. Background of the Tariff Measures
In 2018, the United States, invoking Section 301 of the Trade Act of 1974, imposed tariffs on hundreds of billions of dollars’ worth of Chinese goods, citing alleged unfair trade practices. China responded with reciprocal tariffs. What began as targeted measures on agricultural and industrial goods soon extended to technology products and consumer goods, reflecting deeper structural tensions in the bilateral relationship.
II. Direct Impact on Bilateral Trade
1. Decline in Trade Volume
In the initial phase of the tariff implementation, bilateral trade volumes between China and the U.S. fell sharply. According to the U.S. Department of Commerce, bilateral trade in 2019 declined by nearly 15%. U.S. exports to China fell by approximately 11%, while imports from China dropped by over 16%. The imposition of high tariffs raised costs for businesses and dampened enthusiasm for cross-border trade.
2. Trade Diversion Effects
A portion of trade was diverted to third countries. The U.S. increased imports from countries such as Vietnam and Mexico, while China deepened economic ties with Southeast Asia and Latin America. Some manufacturing firms relocated supply chains out of China or the U.S. to circumvent tariff barriers.
III. Indirect Impact on Business Operations
1. Rising Costs and Margin Pressure
For manufacturers, increased costs of raw materials and components severely compressed profit margins. Small and medium-sized enterprises (SMEs), in particular, bore the brunt of the supply chain disruption, with some exiting the market or shifting focus to domestic sales.
2. Increased Market Uncertainty
Unpredictable trade policy changes and volatile negotiations created heightened uncertainty for business planning. Many multinational firms delayed investment decisions or adopted a wait-and-see approach.
3. Restrictions on Technology and Capital Flows
The escalation in tensions extended to areas such as technology transfers, intellectual property, and investment reviews. Barriers to technological cooperation, cross-border capital investment, and talent mobility emerged, undermining long-term innovation and growth potential.
IV. Systemic Shock to the Global Supply Chain
The tariff war prompted firms to reassess global supply chain configurations. Globalized production systems were challenged, with some companies pursuing “China+1” or “de-Americanization” strategies. While certain countries (e.g., Vietnam, India) experienced short-term gains, the overall efficiency and resilience of global supply chains deteriorated.
V. Macroeconomic and Policy Implications
1. Slower Economic Growth
The International Monetary Fund (IMF) repeatedly downgraded global economic growth forecasts in 2019, identifying the U.S.-China trade conflict as a key risk factor. Manufacturing Purchasing Managers’ Indices (PMIs) in both countries showed consistent declines, reflecting eroded business confidence.
2. Shift Toward Monetary Easing
Both the U.S. and China adopted accommodative monetary policies to cushion the adverse effects of the tariff war, including interest rate cuts and targeted support for manufacturing and export sectors. This underscored the pressure trade tensions placed on macroeconomic policy frameworks.
VI. Conclusion and Outlook
The U.S.-China tariff war is not merely a trade dispute, but an outward manifestation of broader strategic competition and systemic differences. In the short term, it has negatively affected bilateral trade, corporate operations, and global economic stability. In the long term, it may accelerate the restructuring of the global economic landscape and contribute to rising de-globalization trends.
Although the two countries signed a Phase One trade agreement in 2020, fundamental structural issues remain unresolved. Whether the U.S. and China can re-establish stable trade relations through multilateral dialogue mechanisms will be critical to global economic recovery, supply chain reconfiguration, and the restoration of market confidence.
As researchers, we recommend that policymakers adhere to principles of openness and cooperation, addressing conflicts through institutional dialogue and rules-based frameworks rather than excessive protectionist measures. Meanwhile, businesses should enhance flexibility, diversify supply chains, and strengthen risk management to navigate persistent geopolitical and policy uncertainties.