China is the US’s biggest trading partner, with bilateral trade worth over $580 billion. A tariff war between the two countries has a huge impact on both sides’ business owners and consumers. The ongoing trade war between the US and China is going far beyond the normal tariff raises. A comparison of US and China shows, the former may have some advantage due to lower imports from the later. However, in long term, China can do significant damage to the US trade and strategic interests across the world.
BRICS will not die; NATO dies and the US will be left in isolation
Highlight of US-China trade relations
In 2024, the US – China bilateral trade was estimated at $582 billion. While the US imported goods worth over $438.9 billion from China, the imports were just $143.5 billion.
This amounted to a trade deficit of $ 294.5 billion for the US. If we look a bit deeper in the US imports from China, electrical, electronic equipment alone constituted $ 127 billion volume. This was followed by machinery, nuclear reactors, boilers, toys, plastics and furnitures. There are so many other goods that the US is importing from China and finding an alternative for these would be very difficult especially with current tariff regime and an unpredictable Trump.
What does the US exports to China?
The US is exporting goods worth around $ 145 billion which is much less than what it imports. Electrical and electronic equipments top this list of exports with $15 billion dollars. This is followed by export of mineral fuel, oil, oil seeds, fruits, grains, machinery, aircraft and others.
US China Tariff War: Current trends
Before the US – China tariff war started, the imports from China to the US were on rise, while exports were declining. Last year, a jump of 2.8% was seen on the US imports from China, while exports were down by 2.9%.
Who wins US China tariff war?
There are two main areas where consumers and business owners from both sides need to focus — Short term and long gains/losses.
In short term — US business owners may see it as an opportunity to manufacture and sell their products domestically. The tariff protections facilitates this immensely.
But, the US consumers are likely to suffer the most. The chinese products are cheap and make the market very competitive resulting in price drops. But, the US manufacturers who are far less competitive than chinese counterparts, driving on the back of tariff protection, will end up raising the cost.
Further, the manufacturing in the US is not as competitive and developed as in China. The manufacturing sector contributes just 10.2% in the $ 23 trillion economy. In China, manufacturing adds almost 26% in their GDP.
Given the low level of manufacturing, the US is likely to suffer in the trade war with China unless it develops its manufacturing sector to 15-18% of GDP. Taking the manufacturing to this level should take at least five years or even a decade. In the meantime, the US consumers will have to pay more, savings will go down while the businesses may see some gains.
In long term, the in house manufacturing sector of the US may come strong and serve domestic and foreign consumers. While this idea looks nice for the US business owners, the tariff war itself may not sustain for very long.
Impact on China —
China has a strong manufacturing base. It exports goods across the world. With an export of over $ 3.5 trillion, China is number one exporter in the world. In the current US-China tariff war, the China is losing a big market in the US. It will affect its overall GDP and trade in the current year. However, the manufacturers in China are now finding new markets or expanding their markets in other countries including Europe, India, Bangladesh, Africa and Canada. So, a replacement of the US market may come from expanion and aggressive selling in other countries.
Furthermore, China is also responding with similar tarriffs and banning the US businesses. Recently, the Boeing jet sent back by China is one such example where it is hitting the most hyped US businesses. The Chinese manufacturers and influencers exposing the luxury brands — Addidas, Puma, Zara for selling products at very high prices is another front which is open and escalating sharply.
