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A large-scale trade war with China and the United States is in perspective after President Donald Trump threatened to impose prices of more than 100% on imports of Chinese products from Wednesday, April 9.
China said it “would fight until the end” rather than capitulating what it considers as an American coercion, and has already increased its own trade barriers against the United States in response.
What does this escalation of commercial conflicts for the world economy mean?
How much trade do they make?
The trade in goods between the two economic powers increased to around 585 billion dollars (429 billion pounds sterling) last year.
Although the United States has imported much more China ($ 440 billion) than China imported from America ($ 145 billion).
This has left the United States to manage a trade deficit with China – the difference between what it matters and exports – $ 295 billion in 2024. It is a considerable trade deficit, equivalent to around 1% of the American economy.
But it is below the figure of 1 tn at $ 1 that Trump has claimed several times this week.
Trump has already imposed important prices on China during his first mandate as president. These prices were held in place and added by his successor Joe Biden.
Together, these commercial obstacles have helped to repress the goods that the United States imported from China on the one hand, 21% of total American imports in 2016 to 13% last year.
American dependence on China for trade has therefore decreased in the last decade.
However, analysts point out that certain exports of Chinese goods to the United States have been reinstalled in the countries of Southeast Asia.
For example, the Trump administration imposed prices of 30% on Chinese solar panels imported in 2018.
But the US trade department presented elements of evidence in 2023 that the manufacturers of Chinese solar panels had moved their assembly operations to states such as Malaysia, Thailand, Cambodia and Vietnam, then sent finished products to the United States from these countries, effectively eluding prices.
The new “reciprocal” prices which must be imposed on these countries will therefore increase the American price of a wide range of goods from China.
What do the United States and China matter to each other?
In 2024, the largest category of exports of goods from the United States to China was soybeans – mainly used to feed the 440 million pigs in China.
The United States has also sent pharmaceutical and oil products to China.
Going in the other direction, from China to the United States, were large volumes of electronics, computers and toys. A large amount of batteries, which are vital for electric vehicles, have also been exported.
The largest category of American imports from China is smartphones, representing 9% of the total. A large part of these smartphones is made in China for Apple, a multinational based in the United States.
The American prices on China have been one of the main contributors to the decline in Apple’s market value in recent weeks, the price of its stocks lowering 20% in the month.
All these articles imported into the United States from China had to become considerably more expensive for Americans due to the 20% price that the Trump administration has already imposed in Beijing.
If the price reaches 100% – for all goods – then the impact could be five times higher.
And US imports in China will also increase due to China’s reprisal rates, ultimately injuring Chinese consumers in the same way.
But beyond the prices, there are other ways for these two nations to try to fall asleep through trade.
Watch: China says it “will fight until the end” in the trade war
China has a central role in the refinement of many vital metals for industry, copper and lithium with rare earths.
Beijing could place obstacles on the way that these metals reach the United States.
This is something he has already done in the case of two materials called Germanium and Gallium, which are used by the army in thermal imaging and radar.
As for the United States, it could try to strengthen technological blockage on China launched by Joe Biden by making China more difficult to import the type of advanced microchips – which are vital for applications such as artificial intelligence – it cannot still occur.
Donald Trump’s sales advisor Peter Navarro suggested this week that the United States could put pressure on other countries, including Cambodia, Mexico and Vietnam, so as not to exchange with China if they want to continue exporting to the United States.
How could that affect other countries?
The United States and China together represent such a large part of the world economy, around 43% this year according to the International Monetary Fund.
If they were to engage in a total trade war which slowed their growth, or even pushed them to the recession, this would probably harm the economies of other countries in the form of slower global growth.
Global investment would also suffer.
There are other potential consequences.
China is the largest manufacturing nation in the world and produces much more than its population consuming at the national level.
It already manages a surplus of goods of almost $ 1 billion – which means that it exports more goods to the rest of the world that it does.
And it often produces these goods below the real cost of production due to the interior subsidies and the financial support of the State, as cheap loans, for favored companies.
Steel is an example.
There is a risk that if these products could not enter the United States, Chinese companies can try to “throw” them abroad.
Although this can be beneficial for some consumers, this could also reduce producers in countries threatening jobs and wages.
The Hall UK Steel group warned against the danger of an excess of steel potentially redirected to the British market.
The effects of the fallout from a China-US trade war would be felt worldwide, and most economists judge that the impact would be very negative.
