SHI YU/CHINA DAILY
The trade war between the United States and China had far-reaching consequences for both countries, but one thing is clear: the economic fallout for the US was more significant than for China. In an attempt to reduce the trade deficit and reshape the global supply chain, President Trump imposed a series of tariffs on Chinese goods. These moves were designed to force China to the negotiation table and secure a better deal for the US economy. However, as we look back at the consequences of these tariff measures, it becomes evident that the US suffered more than China.
The first round of tariffs came in July 2018, when the US imposed duties on $34 billion worth of Chinese imports. By the autumn of 2018, this had expanded to include $250 billion in Chinese goods. These actions were meant to punish China for practices that the US deemed unfair. However, the retaliatory tariffs from China soon followed, and the US quickly found itself entangled in a global trade war.
In 2019, the situation escalated further. The Trump administration imposed additional 15 percent tariffs on another $120 billion worth of Chinese goods, which brought the total to around $370 billion. By this point, both countries had committed to a series of tariffs on a massive scale, with global supply chains under increasing strain.
The Phase One deal: A temporary truce
By January 2020, after nearly two years of escalating tensions, the US and China reached a Phase One trade deal, which signaled a temporary truce. China agreed to purchase more American goods, and in return, some tariffs were lifted on select products.
Although the deal was hailed as a small victory for the Trump administration, it did little to resolve the core issues of the trade war, and the consequences of the tariffs were already starting to show.
The shift in global supply chains
One of the immediate outcomes of the tariff war was a significant shift in global supply chains. As US companies sought to avoid the growing costs of Chinese imports, many shifted their production away from China to countries such as Vietnam and India. While this diversification was seen as a win for companies looking to reduce their dependence on China, it came with its own set of challenges.
US companies faced quality control issues when moving production to these new countries, as the infrastructure and industrial capabilities of Southeast and South Asia did not match China’s efficiency. The lack of advanced logistics and the need to navigate new trade regulations only increased production costs and led to inefficiencies. The move away from China did not bring the immediate benefits that many had hoped for.
The economic impact on the US
The tariffs ultimately hurt US consumers the most. The trade war led to higher prices on a wide range of goods, including electronics, clothing, and household items. A study found that US consumers faced an additional $50 billion in costs annually due to the tariffs. The prices of products that Americans relied on skyrocketed, and businesses that depended on Chinese imports were forced to pass these increased costs onto consumers.
Moreover, US companies that relied on Chinese-made goods faced higher production costs, which negatively impacted their bottom lines. Industries such as automotive manufacturing were particularly hit hard, as the cost of Chinese-made parts became more expensive due to tariffs. This, in turn, led to higher prices for US consumers, making it difficult for them to afford goods that were once cheaper.
In addition to consumer costs, US farmers also suffered. China’s retaliatory tariffs on US agricultural exports such as soybeans and pork led to significant losses in the American agricultural sector. Farmers in critical swing states, many of whom supported Trump, were hit hard by the tariffs, causing a ripple effect throughout rural America.
The global repercussions: A worldwide economic slowdown
The tariffs did not only affect China and the US; they also had a major impact on the global economy. Global trade disruptions and market uncertainty became widespread as industries dependent on Chinese imports faced significant challenges. Countries in the European Union, Japan, and South Korea also saw the effects of retaliatory tariffs, which disrupted their own trade with both the US and China.
The broader global slowdown, coupled with growing concerns over a decoupling of the US and Chinese economies, contributed to a decoupling in the tech sector. As the US and China increasingly distanced themselves from one another in technology and other industries, new trade patterns began to emerge, shifting the balance of global economic power.
China’s response: Slower growth but adaptation
While China did face its own challenges, such as moderate inflation and slower GDP growth in 2019, the country was more resilient in the face of the tariffs than the US. The Chinese government quickly adjusted by shifting production to other countries and leveraging its massive internal market to cushion the economic impact. By 2019, China’s GDP growth slowed to 6.1 percent, but this was still robust compared to the downturn in the US economy.
Moreover, China’s manufacturers adapted by finding alternative sources for raw materials and diversifying their supply chains. In contrast to US companies, which struggled to maintain consistent product quality and faced logistical hurdles, China’s firms were able to keep production costs under control. Additionally, China’s central government was able to provide support to its economy through policies designed to buffer the impact of the trade war.
Conclusion: Who really lost?
While the US and China both felt the effects of the trade war, the reality is that the US economy was hurt more than China’s. US consumers bore the brunt of higher prices, while American farmers, manufacturers, and industries reliant on Chinese goods suffered significant losses. US businesses faced increased production costs, and the trade war’s impact was felt across the economy.
Meanwhile, China adapted quickly, adjusting its manufacturing base and mitigating the effects of the tariffs. The Chinese economy showed resilience, despite the slow growth, while the US economy struggled with higher costs and slower growth.
Ultimately, the tariffs failed to achieve the Trump administration’s goal of fundamentally altering China’s trade practices. While the Phase One deal may have provided a temporary truce, the long-term effectiveness of these tariff measures remains in doubt.
As we look ahead to the second Trump presidency, the question remains whether the US will continue down the path of confrontation or shift toward a more balanced approach. Will the lessons learned from this trade war lead to a future based on mutual understanding, cooperation, and the pursuit of open, fair trade? Only time will tell.
The author holds a Master’s degree in Management from Harbin Institute of Technology and has a background in business and management, specializing in strategic guidance and solutions for Chinese companies both domestically and internationally.
The views don’t necessarily reflect those of China Daily.
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