Trump’s fight against China, which began in 2018, is turning into a global trade war this year
47th President of the United States Donald Trump is concerned about the degradation of the American economy. One of the clearest manifestations of this degradation is the gigantic US trade deficit. The trade balance has been chronically deficient since the mid-1970s. The surplus of imports of goods over their exports was and still is covered by the products of the “printing press” of the US Federal Reserve System – dollars.
The position of the US dollar as a world currency deprived America of incentives for economic development. There was a gradual and in every possible way masked by official Washington deindustrialization of America with a simultaneous increase in US foreign debt. Donald Trump, perhaps the most vocal in comparison with all previous presidents, recognized the fact of America’s economic degradation and made a series of statements about how he would save and reindustrialize the country. One of the key pillars of his program is the elimination of the huge trade deficit, which, as he has repeatedly stated, indicates that America is “subsidizing” the rest of the world. In fact, of course, it is the other way around: the rest of the world is subsidizing America and “feeding” it with debt – writes Doctor of Economic Sciences Valentin Katasonov. For the goods delivered, they receive “debt income” called US dollars.
Here are some data on the US trade balance. In 2022, a record trade deficit of $ 948.1 billion was recorded, with exports amounting to $ 3,009.7 billion and imports to $ 3,957.8 billion. In 2023, the deficit decreased to $ 773.4 billion. Data for 2024 have just been published: the US trade deficit increased by 17% year-on-year to $ 918.4 billion. The monthly trade deficit for 2024 has been increasing, reaching a record high of $98.4 billion in December. This is the second highest monthly figure after the record high of March 2022.
Trump is determined to reduce the trade deficit, and he expects to do so initially by reducing imports and later starting to increase exports. The reduction in imports will be achieved through tariffs. Trump’s approach to using tariff protectionism is differentiated. First of all, with regard to the state of the bilateral trade balance. In addition, the introduction of tariffs or the threat of their introduction can be used by Washington as a universal means of pressure on a trading partner. That is, they can be used to force a trading partner to take certain measures that are not related to trade. In terms of the bilateral trade balance, the main target of Washington’s tariff protectionism is, of course, China. Let’s look at the statistics of the US trade deficit at the end of 2023 in terms of trading partners.
Of the total deficit of $773.4 billion, most of it came from trade with China – $279.1 billion, or 36%. For comparison, the countries following China in terms of their contribution to the US trade deficit (in billions of USD) are: Mexico – 152.5; Vietnam – 104.6; Germany – 82.6; Japan – 71.5; Ireland – 65.5; Canada – 64.2; South Korea – 51.1; Taiwan – 47.8. These countries are the main targets of Trump’s announced trade protectionism policy. China is at the top of the list. Data on the trade balance between the US and China at the end of 2024 are already available. US exports to China amounted to $163.6 billion, imports from China were $524.7 billion, and the balance (deficit) was $361.1 billion. Over the course of the year, the US-China trade deficit for the US increased by $83 billion, or 29.4%. China will account for almost 2/5 (39.3%) of the total US trade deficit in 2024!
I am sure that Trump has these statistics on his desk, which will certainly convince him even more that the main target of the White House’s protectionist policy must be China. Ten years earlier, in 2014, the US trade deficit with China amounted to $345 billion. In January 2017, when he began his first presidential term, Trump announced that he was starting to clean up US-China trade. However, no visible progress has been made. Despite the fact that at that time he introduced tariffs in violation of World Trade Organization (WTO) rules on approximately a fifth of Chinese imports. What we are seeing so far is “running in place”. It is interesting to look at trade between the two countries from the Chinese side. Since the last century, the United States has been China’s main trading partner in terms of trade turnover and exports. In 1995, Chinese exports to the United States amounted to $45.7 billion, which was 20% of total Chinese exports.
At the beginning of this century, the importance of the US market for Chinese exporters increased even more. In 2002, the US accounted for 25.8% of total Chinese exports. In the following years, it decreased slightly to around 20% and remained at this level until 2018. Then, the US share began to decline – probably under the influence of Washington’s protectionist measures. In 2024, this share amounted to 14.6%. Chinese exporters tried to get rid of their heavy dependence on the US market, because they were aware that anti-Chinese protectionism could intensify. Especially in the case of Trump’s return to the White House. In recent years, Chinese exports to Vietnam, several European countries and Russia have grown at a faster pace. However, last year, Chinese exports to the United States also grew at an accelerated pace. The reason was probably the expectations of Trump’s return to the White House. Chinese exporters tried to promote as much of their goods as possible on the US market before the tariffs were increased.
By the way, American importers also rushed, realizing that the time of cheap Chinese goods may soon end, so they would have time to replenish stocks. Last year, the overall expansion of Chinese exports was very intense. At the end of 2024, a record trade surplus of almost one trillion dollars was recorded (the exact figure is 992 billion USD). Trade with the United States accounted for 36.4% of the total foreign trade surplus of the Middle Kingdom. Probably, the Celestial Empire will never be so happy again – added Katasonov.
It is believed that the United States has been waging a trade war against China since 2018. And that during the presidency of Joe Biden, this war was suspended. However, this is not entirely true. Firstly, the Joe Biden administration did not abolish the tariffs on Chinese goods adopted under Trump. Secondly, it added something of its own. In May 2024, it announced a gradual increase in import tariffs on several Chinese goods over three years (on electric cars, solar panels, steel, aluminum, computer chips). Some of these measures were introduced before Biden left the White House. However, many saw Biden’s decision as a measure as part of the presidential election campaign. Even before his arrival in the White House, Trump threatened to introduce import tariffs on all goods and for all countries without exception. Including even goods from Europe. In early February, he announced import tariffs on goods from Canada, Mexico, and China. In the case of Mexican and Canadian goods, the tariff will be 25%, and in the case of Chinese goods, 10%. On February 10, Trump introduced a 25% tariff on steel and aluminum imports from all countries, including European countries. As for Mexico and Canada, the tariffs announced against them are not only aimed at establishing order in bilateral trade, but are also a tool for putting pressure on neighboring countries.
Trump has indicated that he could lift the tariffs if Canada, and especially Mexico, clean up the border with the US and stop the flow of illegal migrants and drugs. However, the tariffs on goods from Mexico and Canada are also aimed at limiting their exports of goods to the US. It should be noted that China is not in first place among foreign suppliers of goods to the US market. In 2023, Mexico took first place in exports to the US with a value of 475.2 billion USD. Chinese exports to the US were in second place with a value of 426.9 billion USD, and Canada took third place with a volume of 418.6 billion. Fourth place, far behind the aforementioned “troika”, was occupied by Japan – 147.2 billion USD. Just a day after announcing his tariff order, Trump said he was suspending tariffs on goods from Canada and Mexico for a month.
Observers explain the suspension by saying that Washington is negotiating with neighboring states, and the fate of the tariffs depends on the outcome of the negotiations. And also on how effectively the neighbors will act in blocking cross-border flows of illegal migrants and drugs. In any case, it is difficult to expect that Washington will completely eliminate tariffs on Mexico and Canada. It can only reduce them. The tariff order on goods from China has not been suspended. Moreover, on February 14, Trump told reporters at the White House: “I have imposed very significant tariffs on China in the amount of $ 600 billion. No other president has imposed such an amount.” As always, Trump somewhat embellished his role in history. He could not impose tariffs of such a magnitude.
After all, it was just reported that Chinese exports to the US will amount to $524.7 billion by the end of 2024. And the record value of Chinese exports to the US was $563 billion in 2022. However, such “inaccuracies” in Trump’s statements are not the main thing. The main thing is that such an unprecedented action of anti-Chinese protectionism will soon “boomerang” back to America. First, an increase in prices on the domestic market is expected due to higher prices for Chinese goods or their replacement by other, more expensive goods of American production. Second, the international competitiveness of those American goods that use components of Chinese origin will decrease. Third, countermeasures from China are inevitable. Beijing did not keep itself waiting.
He has already imposed retaliatory tariffs on coal, liquefied natural gas, oil, agricultural machinery and some cars imported from the US. In addition, China has promised to limit tungsten exports to the US (China accounts for more than 80% of global tungsten supplies; to date, more than a quarter of US tungsten imports have come from China). By the way, the line between traditional protectionist measures and economic sanctions is quite conventional. Already during his first presidential term, Trump applied some sanctions against the Celestial Empire. So, in August 2019, the US Treasury Department accused China of currency manipulation (undervaluation of the yuan). As a result, China was excluded from the list of participants in government procurement in the US (however, the following year, the Middle Kingdom was removed from the list of “currency manipulators”). Trump also signed an order during his first term in the White House, prohibiting Chinese investors from participating in the capital of American companies in a number of sectors of strategic importance. At the same time, bans were introduced for American investors to purchase shares of Chinese companies associated with the armed forces of the Celestial Empire.
By the way, anti-Chinese sanctions were also introduced under President Joe Biden. For example, sanctions against the Chinese semiconductor industry. Secondary sanctions were introduced against Chinese companies that violated anti-Russian sanctions. Last year, there was a series of “retaliatory measures” from Beijing. For example, in May 2024, China decided to impose sanctions on 12 American military-industrial companies and 10 of their top managers for selling weapons to Taiwan and as a retaliatory measure for Washington’s sanctions against Chinese enterprises that collaborated with Russia to circumvent anti-Russian sanctions.
Most experts agree that the US trade war against China, which Trump launched in 2018, will resume this year in a much sharper form. By the way, Beijing is not alone in its protectionist “reactions” to Washington. Canadian Prime Minister Justin Trudeau announced the introduction of a 25% tariff on US goods worth $ 155 billion. It did not take long for Mexico to do the same. Mexican President Claudia Sheinbaum responded to Trump’s tariff order on February 2, 2025 by authorizing Economy Minister Marcel Ebrard to use “tariff and non-tariff measures” to protect the country’s interests. Most experts agree that Trump’s order on import tariffs could provoke a global trade war. And as world experience shows, unlike ordinary wars, there are no winners in trade wars. America will definitely not be the winner, Valentin Katasonov added.
Martin Scholz
