U.S.–China trade war

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Leaders at the center of the U.S.–China trade war: U.S. President Donald Trump and Chinese President Xi Jinping

© Drew Angerer/Getty Images, © Lintao Zhang/Getty Images; Photo composite Encyclopædia Britannica, Inc.

The U.S.–China trade war has become one of the defining economic conflicts of the 21st century. Launched in 2018 during Donald J. Trump’s first presidential term, the dispute began with American tariffs on Chinese goods. These actions were presented as a response to trade practices viewed by U.S. officials as harmful to American industry, contributing to a widened U.S. trade deficit and raising national security concerns—particularly reduced domestic capacity for critical manufacturing and a need for reshoring.

China retaliated with its own tariffs and accused the United States of using disingenuous tactics to stall China’s rise as a peer economic and technological power. Both sides have plausible claims: China has frequently disregarded World Trade Organization norms, supporting its companies through subsidies and other forms of state assistance, while the U.S. has employed unilateral and aggressive strategies clearly aimed at undermining Chinese technological advancement.

What has emerged is not just a fight over trade, but a struggle for global economic, technological, and geopolitical dominance.

After World War II, the United States led the construction of a global trade system centered on low tariffs, open markets, and institutions like the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO). China, initially following a centrally planned economic model, began market reforms under Deng Xiaoping in 1978 and eventually joined the WTO in 2001. Its accession catalyzed China’s rise as a global manufacturing hub and led to rapid trade integration with the United States. Bilateral trade surged: U.S. imports from China increased to over $400 billion by 2023 from roughly $100 billion in 2001.

Over time, however, economic interdependence gave way to deepening imbalances. The U.S. trade deficit with China widened dramatically, and American policymakers grew increasingly concerned that China wasn’t adhering to the spirit of its WTO commitments. Grievances included industrial subsidies, forced technology transfers, intellectual property theft, and discriminatory treatment of foreign companies operating in China.

Chinese officials countered that the WTO permitted different development models, argued that China’s rapid rise required different standards than America’s centuries-long economic evolution, and accused the U.S. of seeking to hinder its progress. Alongside economic tensions, various geopolitical issues strained the U.S.–China relationship, including historical points of friction (such as the status of Taiwan) and emerging concerns (such as human rights abuses in Xinjiang and the race for technology leadership).

In the early months of 2018, increasing tensions and U.S. protectionism laid the groundwork for the trade war. That January, the U.S. imposed tariffs on solar panels and washing machines to protect American companies; in March, it added tariffs on steel and aluminum, citing national security concerns. These global tariffs covered all U.S. imports, and although China wasn’t disproportionately affected, its government saw the invocation of national security as a provocative precedent.

Around the same time, the U.S. launched a broad investigation into China’s trade practices. On March 22, 2018, U.S. Trade Representative Robert Lighthizer released a detailed report accusing China of unfair policies and claimed that these were costing the U.S. hundreds of billions of dollars annually. The following day, Trump proposed 25% tariffs on $50 billion worth of Chinese imports, ranging from aircraft components and batteries to flat-screen TVs, medical equipment, satellites, and certain weapons. 

China responded quickly and framed its objections as a defense of international trade rules. On April 2, it imposed retaliatory tariffs on 128 U.S. products—including pork, fruit, wine, and steel piping—in response to the steel and aluminum tariffs. Although modest in scale, these tariffs were strategically designed to hit politically sensitive sectors, especially agriculture in pro-Trump states. The move also served as a pointed signal that further escalation—such as the broader China-specific tariffs then under discussion—would be met in kind.

July 6, 2018, came to mark the official beginning of the trade war, as the United States imposed a 25% tariff of $34 billion of Chinese imports—the first phase of the broader $50 billion package proposed March 22. The targeted products were mostly tied to China’s “Made in China 2025” strategy, which aimed to foster advanced industries like robotics, aerospace, and electronics; most mass-market consumer goods such as cell phones, laptops, apparel, and toys were deliberately spared. A second phase of American tariffs, targeting $16 billion of Chinese imports, followed in August. 

China responded to each phase in kind: It matched the July tariffs with its own 25% tariffs on $34 billion of U.S. goods—primarily agricultural and automotive exports like soybeans, pork, and cars—and then retaliated again in August with 25% tariffs on an additional $16 billion of U.S. products, including vehicles, energy goods, and machinery. These exchanges turned the dispute into a structured, tit-for-tat trade war.

Although the dollar value of early rounds was roughly symmetric, China’s overall capacity to retaliate was limited by the size of the trade imbalance: In 2018, the U.S. imported about $540 billion in goods from China, compared to only $120 billion in Chinese imports from the U.S. As a result, Beijing couldn’t match U.S. tariffs dollar-for-dollar indefinitely and had to carefully target sectors that were politically sensitive.

Subsequent rounds followed. A 90-day truce announced at the G20 Summit in December 2018 briefly paused new escalation and set the stage for intensive trade talks throughout early 2019. But when those negotiations stalled, the U.S. proceeded in September with tariffs on an additional $200 billion worth of Chinese goods—initially set at 10% and later raised to 25% in May 2019. By the end of 2019, the U.S. had imposed tariffs on roughly $360 billion of Chinese imports, while China had retaliated with duties on about $110 billion worth of U.S. goods.

The effects were widespread. Global manufacturers began rerouting supply chains to Vietnam, Mexico, and elsewhere; reshoring to the U.S. was limited. American consumers bore much of the cost of tariffs, and both countries saw diminished trade flows.

Around this time, the first clear escalations of the U.S.–China conflict out of the realm of trade and into the arena of technology played out when the U.S. blacklisted Huawei, a leading Chinese telecommunications company, over national security concerns, and China began to prepare export restrictions on rare earth metals.

On January 15, 2020, the two sides signed the Phase One agreement, a partial trade deal designed to deescalate the trade war after nearly two years of rising tariffs and economic uncertainty. Both governments had strong incentives to pause: U.S. financial markets were rattled, and exporters and farmers were growing increasingly vocal. Meanwhile, China’s economy was slowing under the weight of tariffs and investor unease. Rather than resolving the broader conflict, the deal focused on a limited set of economic issues where compromise was possible. Under the deal:

The agreement didn’t address deeper structural issues like Chinese industrial subsidies or the role of state-owned enterprises. It paused further escalation but institutionalized a more adversarial trade relationship, laying the groundwork for long-term economic and technological competition.

The outbreak of the COVID–19 pandemic just weeks later shifted priorities dramatically. As both sides scrambled to secure medical supplies, Washington temporarily waived tariffs on hundreds of health-related imports—including masks, ventilators, and personal protective equipment—while Beijing expedited tariff cuts on U.S. pharmaceuticals and medical components.

Despite this momentary cooperation, mutual suspicions deepened. Accusations about the virus’s origins and China’s early handling of the outbreak added new strain to an already brittle relationship.

Bilateral trade slumped in early 2020 as global supply chains froze, but China’s swift containment of the virus and rapid factory reopenings gave it an economic edge by year-end. By December 2020, U.S. imports from China had rebounded to levels near those seen before the trade war started, even as tariffs remained in place.

As the year closed, the Phase One agreement faltered, with China having fulfilled only 57% of its first-year purchase commitments. Although Beijing advanced some intellectual property reforms and opened parts of its financial sector to U.S. companies, the underwhelming purchase figures hardened views in Washington that tariffs remained a necessary instrument of pressure.

The trade dispute increasingly spilled into the technology sector throughout 2020. In May, the U.S. Department of Commerce tightened restrictions on Huawei, barring foreign manufacturers from using U.S. equipment to produce chips for the company.

The agency continued expanding its entity list, effectively barring American businesses from trading with dozens of Chinese entities deemed security risks. In December, it blacklisted DJI, China’s top drone maker, and Semiconductor Manufacturing International Corporation (SMIC), the country’s leading chip foundry.

These moves made it clear that the U.S. wasn’t simply using trade policy to protect domestic industries—it was aiming to limit China’s technological progress. Beijing responded with its own legal tools. In December 2020, its new Export Control Law took effect, giving Chinese authorities the power to block exports of sensitive technologies.

Earlier that year, China had introduced provisions for an Unreliable Entity List—a vaguely defined policy tool allowing it to penalize foreign companies deemed a threat to national interests. In 2021, it followed with a more formal response: the Anti-Foreign Sanctions Law, which authorized countermeasures against foreign businesses that comply with sanctions targeting China.

In September 2020, a World Trade Organization panel ruled that the initial round of U.S. tariffs had violated international trade rules, siding with China’s claims that the U.S. had acted unilaterally. The U.S. immediately appealed the decision to the WTO’s paralyzed appellate system, which had been rendered nonfunctional by Trump-era opposition to new appointments. The appeal effectively stalled the case, but the ruling highlighted the broader threat the trade war posed to the international order.

In the final weeks of the Trump administration, Congress passed the CHIPS for America Act as part of a defense bill, authorizing support for domestic chip production. Although it didn’t provide funding, the law laid the groundwork for future taxpayer support. Substantial funding for chip manufacturing came later through the broader CHIPS and Science Act of 2022.

When President Joe Biden took office in January 2021, many observers expected a reset, but Biden largely embraced his predecessor’s tariff legacy. His administration signaled that the U.S. would keep pressing Beijing on structural economic issues, but would do so in closer coordination with allies. In an October 2021 speech, U.S. Trade Representative Katherine Tai confirmed the administration’s intention to hold China accountable for unmet Phase One promises while maintaining tariffs as leverage.

At the same time, Biden prioritized long-term strategic competition, emphasizing supply chain resilience and industrial policy. In February 2021, an executive order launched federal reviews of vulnerabilities in key sectors, including semiconductors, critical minerals, pharmaceuticals, and batteries.

Meanwhile, concerns about human rights in China introduced new dimensions to the trade relationship. In December 2021, Congress passed the Uyghur Forced Labor Prevention Act (UFLPA), which effectively banned the import of goods from China’s Xinjiang region unless companies could prove they were produced without forced labor. The law transformed customs enforcement into a tool of strategic competition, tying trade policy to values-based diplomacy. China responded angrily, accusing the U.S. of weaponizing human rights for geopolitical ends.

The Phase One agreement expired at the end of December 2021, by which time it had largely been abandoned by both sides. No new targets were set, and there was no follow-up deal in sight. The broader conflict had only hardened. Not only had Phase One failed to deliver on its central promises, but tariffs had persisted and technology competition had escalated dramatically.

By 2022, the long-term effects of the original tariff war began to show more clearly in trade flows. China’s share of U.S. goods imports, which had hovered around 21% to 22% in 2017, fell to roughly 17%—its lowest level since 2006. At the same time, imports from countries such as Mexico and Vietnam rose significantly. In 2023, Mexico overtook China to become the United States’s largest source of imports, and Vietnam made significant gains in sectors like electronics and apparel.

Yet many analysts cautioned that these shifts reflected trade diversion rather than a fundamental separation of U.S. and Chinese supply chains, or decoupling. Chinese companies increasingly set up operations in Southeast Asia and Latin America, and Chinese components often remained embedded in goods assembled elsewhere.

As a result, a growing share of Chinese exports to the U.S. entered indirectly—rebranded, reassembled, or repackaged in third countries. Still, the broader trend was clear: U.S. companies were actively pursuing a “China plus one” strategy, diversifying production beyond China to reduce geopolitical risk.

In 2022, the Biden administration continued to push for assertive economic strategies centered on using industrial policy to secure national advantage and reduce dependency on China. The CHIPS and Science Act, passed in August, committed more than $50 billion in federal funding to rebuild the U.S. semiconductor industry, with strict guardrails prohibiting recipients from expanding advanced chipmaking in China. A month later, the Inflation Reduction Act introduced sweeping subsidies for clean energy technologies, such as electric vehicles and solar panels, but conditioned eligibility on sourcing materials from the U.S. or allied nations.

That October, the U.S. government unveiled sweeping export controls aimed at limiting China’s access to advanced computing power and semiconductor manufacturing equipment. High-end processors like NVIDIA’s A100 and H100 were restricted, and “U.S. persons”—a legal term that goes beyond citizens to include green card holders and U.S.-based businesses—were barred from supporting leading-edge Chinese semiconductor fabrication plants (fabs).

In response, China began leaning on its own points of leverage. In 2023, it imposed new licensing requirements on exports of gallium and germanium—two critical inputs for semiconductors and defense systems—and later added graphite, essential for electric vehicle batteries.

In late 2022, China filed a complaint at the World Trade Organization challenging the U.S. semiconductor export controls, arguing they violated WTO rules and misused national security exemptions. China’s complaint came after a 2020 ruling that found the original Section 301 tariffs on Chinese goods to be unlawful. But the WTO’s dispute settlement mechanism remained largely paralyzed, with the U.S. having blocked appointments to its Appellate Body. As a result, both countries operated with little risk of legal consequence, while international trust in the global trading system continued to erode.

With the 2024 U.S. presidential election approaching, tariffs returned to center stage. In May, the Biden administration announced a fresh round of increases, raising duties on Chinese EVs to 100% and imposing new or higher tariffs on solar cells, batteries, and several critical minerals. China condemned the action and pledged to respond, although it stopped short of sweeping retaliation. Instead, it expanded its existing controls on strategic minerals and reaffirmed its long-standing strategy of fostering domestic innovation and reducing reliance on foreign inputs.

After returning to office in January 2025, President Trump reignited the U.S.–China trade war. On February 1, he imposed a 10% blanket tariff on all Chinese imports (on top of the sector-specific tariffs that were already in effect) and levied 25% tariffs on imports from Mexico and Canada (although goods covered under the USMCA were exempted).

Trump’s rationale for the 10% blanket tariff was based on China’s role as a major source of fentanyl, a synthetic opioid driving a surge in overdose deaths in the United States. He claimed the drug was often trafficked through Mexico and Canada to reach the U.S. market. Although many experts acknowledged China’s role in producing fentanyl, they questioned the logic of using broad trade measures to address what they view as a public health and law enforcement issue. Later that month, the tariff on China was doubled to 20%. China responded with 10% to 15% tariffs on select U.S. exports in a measured but resolute move.

On April 2, Trump unveiled “Liberation Day,” a sweeping tariff overhaul. A universal 10% tariff on all U.S. imports took effect April 5, alongside country-specific surcharges on dozens of countries including 20% for the EU, 24% for Japan, 25% for South Korea, and 26% for India and Vietnam. China was hit hardest, with a 34% tariff layered atop preexisting duties, including the earlier 20% surcharge Trump justified as a fentanyl deterrent. Some of the existing duties already exceeded 100% on products such as like EVs, semiconductors, and solar panels.

China retaliated quickly. On April 4, it announced 34% tariffs on U.S. goods, imposed export controls on critical rare earth metals, blacklisted key U.S. companies (mostly in the defense industry), and filed a complaint with the WTO. Beijing called on Japan and South Korea to form a united front for coordinated retaliation, but those countries distanced themselves from the call, not wanting to become entangled in the increasingly hostile U.S.–China rivalry.

By April 9, however, facing political backlash and global market panic, the U.S. paused the country-specific tariffs for all nations except China. The universal 10% tariff remained. That same day, Trump raised China tariffs to 125%, which, on top of the 20% tariff imposed days earlier, brought the total to 145%—effectively choking off nearly all bilateral trade.

Markets reeled: U.S. stocks plunged, Treasury yields surged across maturities (from short-term notes to 30-year bonds), gold prices spiked, and the dollar fell sharply against major currencies. China reciprocated, bringing its tariffs to 125% on April 10.

Trade between the two nations all but ceased.

On May 12, following back-channel talks in Geneva, the situation shifted dramatically as both sides reached a 90-day agreement to pause hostilities. Despite the prior month of escalating tensions and near-total halt of bilateral trade, emerging pressures forced a reassessment.

U.S. importers and consumers were facing surging prices; China was dealing with factory closures and rising unemployment; global markets were increasingly volatile; and backlash from American businesses and farmers was rising.

Under the deal, the 145% U.S. tariff on Chinese goods dropped to 30%, reflecting the earlier 20% duty imposed in April and the 10% universal tariff. China, in turn, reduced its tariffs to 10% and agreed to suspend export controls on rare earth metals.

Even after the Geneva truce eased U.S.–China tensions, the Trump administration continued to escalate on other fronts. On May 23, Trump proposed a 50% tariff on imports from the European Union, citing stalled negotiations and accusing Brussels of trade manipulation.

Although the tariff was originally set to take effect June 1, Trump’s administration granted a 39-day extension following a call with European Commission President Ursula von der Leyen. The EU, meanwhile, warned of potential WTO action if the tariff were implemented.

On May 28, the U.S. Court of International Trade struck down many of the administration’s global tariffs, ruling that Trump had overstepped his authority by invoking emergency powers to impose sweeping duties without congressional approval.

The administration appealed immediately, and a day later, a federal appeals court issued a temporary stay, allowing the tariffs to remain in place until a final ruling was handed down. On February 20, 2026, the U.S. Supreme Court upheld the trade court’s view that the Trump administration had overstepped its authority by using emergency powers to impose sweeping tariffs without congressional approval, invalidating key parts of the administration’s global tariff program.