The trade war between the U.S. and China has evolved into a defining geopolitical conflict. Initially characterized by tariff escalations, it has expanded to encompass broader technological, economic, and military dimensions. This rivalry increasingly tests the resilience of global diplomacy as nations are compelled to navigate the conflictual environment created by the two countries. The intensification of the U.S.-China trade war is not merely an economic problem, but a deep, structural transformation of the world order, which puts the effectiveness of multilateral diplomacy to the test in managing relations between interdependent-rival powers.
Origins and Escalation
The U.S.-China trade war started in 2018 with a series of reciprocal tariffs introduced by the Trump administration, aiming to reduce the U.S. trade deficit and counteract alleged Chinese intellectual property theft. By 2025, the trade war will most likely intensify, with tariffs reaching up to 60% on Chinese goods and 12% on average for global imports into the U.S. Also, this conflict will have global consequences. China may devalue the yuan to support its manufacturers, lowering Chinese goods’ costs worldwide. By 2025, previously neutral countries could feel compelled to impose their own trade barriers. The conflict has also shifted from trade to broader strategic competition, particularly in technology. Both nations have implemented restrictions to secure their dominance, with the U.S. limiting exports of advanced semiconductors and China accelerating its domestic innovation efforts. This underlines the transition from economic rivalry to a contest for technological and strategic supremacy.
Global Implications of the U.S.-China Rivalry
The consequences of the U.S.-China trade war are felt globally, impacting developed nations and emerging economies alike. While some countries capitalize on the opportunities for economic growth, others struggle to maintain their sovereignty and ensure economic resilience.
Divisions in the Developed World
In Europe, the rivalry exacerbates internal divisions among member states of the European Union (EU), complicating a possible collective response. Germany, heavily reliant on China as its largest trading partner, particularly in the automotive sector, has resisted calls to impose steep tariffs on Chinese electric vehicles (EVs). German automakers such as Volkswagen and BMW, which depend on the Chinese market for a significant portion of their revenues, have lobbied against policies that might provoke retaliatory actions from Beijing. Other countries have imposed barriers on Chinese cars: the U.S. proposes banning Chinese software in cars, Canada already set 100% tariffs on Chinese EVs.
In contrast, countries like France and Italy support protectionist measures to shield their domestic industries from the influx of low-cost Chinese EVs. France, advocating economic sovereignty, argues for stricter regulations to prevent Chinese dominance in strategic sectors such as energy and transportation. This divergence weakens the EU’s ability to present a unified stance, limiting its effectiveness as a mediator. Meanwhile, the UK has pursued a more pragmatic approach post-Brexit, seeking closer trade ties with the U.S. while maintaining cautious engagement with China. This balancing act underscores the difficulty for developed nations to maintain autonomy in an increasingly polarized global landscape.
Reverberations in the Emerging Markets
In Southeast Asia, the rivalry has created opportunities for some nations while imposing significant strategic dilemmas. Vietnam has emerged as a major beneficiary of the relocation of manufacturing from China, particularly in electronics and textiles. However, this shift increases its dependence on U.S. and Chinese markets, exposing the country to potential economic shocks. Indonesia has taken a more assertive stance. In response to perceived dumping practices by China, its trade ministry threatened to impose tariffs of up to 200% on Chinese goods such as ceramics and textiles. These measures protect local industries but risk straining economic ties with Beijing, a critical source of infrastructure investment. Similarly, the Philippines faces a precarious dual dependency, relying on Chinese investment in infrastructure while aligning strategically with the U.S. in security matters, particularly in the South China Sea.
In Latin America, the rivalry manifests primarily through trade and investment dynamics. Brazil, for instance, has imposed tariffs on Chinese steel imports to protect its domestic steel industry while expanding agricultural exports to China, particularly soybeans. This dual approach reflects Brazil’s attempt to balance economic diversification with its reliance on Chinese markets. Mexico, closely tied to the U.S. through the United States-Mexico-Canada Agreement (USMCA), has benefited from the relocation of U.S. supply chains away from China. However, its increased tariffs on Chinese imports highlight the challenges of protecting local industries without alienating a critical trade partner.
In Africa, China’s dominance as a lender and investor in infrastructure projects creates dependencies that limit African nations’ diplomatic options. For example, Kenya and Ethiopia, heavily indebted to Beijing, struggle to negotiate terms that protect their domestic industries. The U.S. has sought to counterbalance this influence through initiatives such as Prosper Africa, which aims to deepen trade ties and provide alternatives to Chinese investments.
The Middle East presents a different dynamic, where both the U.S. and China are critical players. Saudi Arabia has strengthened its energy partnership with China while maintaining a strategic alliance with the U.S. This reflects a broader regional strategy of maximizing benefits from both powers while avoiding entanglement in their rivalry.
A Double-Edged Sword: Economic Interdependence
Despite their adversarial relationship, the U.S. and China remain deeply economically interdependent. China accounts for a significant portion of global manufacturing, while the U.S. leads in advanced technology and is a major destination for Chinese exports. This interdependence creates a paradox: while the trade war escalates tensions, neither side can afford complete decoupling without severe economic repercussions.
Diplomacy Amid Polarization
The U.S.-China rivalry has strained traditional diplomatic frameworks like the World Trade Organization (WTO) and G20, which have proven ineffective in managing the conflict. Bilateral and regional agreements, such as China’s Belt and Road Initiative (BRI), have become prominent, creating dependencies that complicate global diplomacy. Nations such as India have adopted strategies to maximize autonomy by diversifying trade partnerships and investing in domestic industries, reflecting a broader trend among middle powers seeking to navigate the rivalry. At the same time, the intensification of the U.S.-China trade war underscores the limitations of existing diplomatic institutions in addressing such conflicts. Reforming organizations like the WTO to address state subsidies and intellectual property theft, and strengthening regional agreements, could provide pathways for reducing tensions. However, such efforts require active participation from both the U.S. and China, which remains uncertain given their current trajectories.
