China US Trade war | CSS 2026 revision

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US–China Trade War
Introduction
The US–China Trade War refers to a prolonged phase of economic confrontation, initiated in 2018, marked by reciprocal tariffs, technology restrictions, and strategic decoupling between the world’s two largest economies. While presented as a dispute over trade deficits, it is fundamentally rooted in geoeconomic rivalry, technological supremacy, and hegemonic transition in the international system.
Historical Background
The US–China economic relationship deepened after China’s accession to the WTO in 2001
By 2017, the US trade deficit with China exceeded USD 375 billion
The Trump administration invoked Section 301 of the US Trade Act (1974), accusing China of:
Forced technology transfer
Intellectual property theft
State subsidies to SOEs
This marked the formal onset of the trade war in 2018.
Major Phases of the Trade War
Phase I: Tariff Escalation (2018–2019)
US imposed tariffs on over USD 360 billion worth of Chinese goods
China retaliated with tariffs on USD 110 billion of US exports
Key affected sectors:
US: Agriculture, manufacturing
China: Electronics, machinery
Phase II: Phase One Deal (2020)
China agreed to:
Increase purchases of US goods by USD 200 billion
Strengthen IP protection
Structural issues (subsidies, SOEs) remained unresolved
Phase III: Strategic Decoupling (2021–2025)
Shift from tariffs to technology and supply-chain warfare
US export controls on:
Semiconductors
AI chips
Advanced manufacturing equipment
Investment screening via CFIUS and outbound investment restrictions
Theoretical Explanation
1. Realist / Power Transition Theory
Trade war as a symptom of hegemonic rivalry
US seeks to delay China’s rise as a peer competitor
2. Neo-mercantilism
Emphasis on trade balances, industrial policy, and economic nationalism
3. Dependency and World-Systems Perspective
China moving from semi-periphery to core threatens existing global hierarchy
Economic and Strategic Dimensions
Economic Impact
Global supply chains fragmented
Increased inflationary pressures globally
US–China bilateral trade continues but is re-routed via third countries
Despite tensions, US–China trade remained above USD 550 billion by 2023–24, indicating selective decoupling, not total disengagement.
Technological Dimension
US targets China’s Made in China 2025 strategy
Semiconductor war has become the core battlefield
China responding through:
Indigenous innovation
State-led tech self-reliance
Global Implications
For the International System
Weaponization of trade and technology
Weakening of WTO dispute settlement mechanism
Rise of geo-economics over multilateralism
For Developing Countries
Supply-chain relocation to:
Vietnam
Mexico
India
Opportunities and vulnerabilities coexist
Implications for Pakistan
Indirect exposure through:
Reduced global growth
Trade volatility
Strategic balancing required between:
China (CPEC, strategic partner)
US (exports, IMF influence)
Opportunity to integrate into China-plus-one supply chains remains underutilized
Current Scenario (2025)
Trade war has transformed into a long-term strategic competition
Tariffs largely remain in place
Bipartisan consensus in the US on containing China’s technological rise
China focusing on:
South-South trade
BRICS expansion
De-dollarization narratives
Conclusion
The US–China Trade War is not a temporary trade dispute, but a manifestation of systemic rivalry in a transitioning world order. While tariffs initiated the conflict, technology, ideology, and power politics now define it. The outcome will shape the future of globalization, multilateralism, and global economic governance.
“Trade wars are easy to win” proved illusory; strategic competition, however, is here to stay.
Key Quotations (for CSS)
Robert Gilpin: “The international economy is not autonomous but is embedded in power relations.”
Graham Allison: “When a rising power threatens to displace a ruling power, structural stress follows.”
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