A New Chapter in the Trade War
In early April 2025, the United States, under President Donald Trump’s administration, issued a policy increasing import tariffs on Chinese products up to 145%. These tariffs applied not only to tangible goods but also to digital technology products such as semiconductor chips, Artificial Intelligence (AI) hardware and software (Reed, 2025).
In response to Trump’s measures, China retaliated by imposing 125% tariffs on U.S. products, particularly targeting agricultural and energy commodities, leading to a lack of market access for U.S. goods in China (CNBC, 2025).
The trade war competition began between Donald Trump and Xi Jinping during 2018–2019, commonly referred to as “Trade War 1.0,” and started when President Donald Trump announced elevated tariffs on Chinese exports and imports, particularly focusing on physical goods and trade imbalances in consumer products (Kleintop, 2024).
Unlike “Trade War 1.0,” which focused on physical goods, “Trade War 2.0,” started from 2020 to 2025 has expanded its scope to include digital technology sectors such as semiconductor chips, Artificial Intelligence (AI) hardware and software (Kleintop, 2024).
Another key difference is that while “Trade War 1.0” retaliation emphasized tariffs and market access restrictions, “Trade War 2.0” has seen a shift toward tightening technology controls and restricting the trade of digital technologies.
When we examine the differences between Trade War 1.0 and 2.0, it becomes evident that over the years, the two giant nations—the United States and China—have shifted their focus and priorities. Whereas Trade War 1.0 primarily concerned trade balances and physical goods, Trade War 2.0 is increasingly about technological security, Intellectual Property Rights (IPR), and dominance over technological supply chains (Dieter, 2019).
Consequences of Trade War 2.0
Firstly, this trade war has impacted several major companies, such as Huawei, one of the largest multinational corporations in the technology and communications sector. Another affected company is SMIC (Semiconductor Manufacturing International Corporation), the largest semiconductor and chip manufacturer company in China, established in 2000 and headquartered in Shanghai (Kubota, 2024).
Secondly, it has generated instability within the global economic system, triggering significant changes in global supply chains. Many companies have shifted production from China to alternative locations such as India and Vietnam, while the semiconductor-dependent technology industry increasingly looks to Taiwan and South Korea.
Thirdly, it has created a Global Trade Disruption, altering the traditional patterns of trade. This disruption was largely driven by President Donald Trump, following the advice of Peter Navarro, Director of the White House’s Office of Trade and Manufacturing Policy (OTMP) during Trump’s second term, beginning on January 20, 2025. Navarro promoted the “Make America Great Again” agenda by advocating protectionism (Ball, 2018). This shift resulted in higher tariffs, restricted access to foreign products, elevated consumer prices, job losses, and supply shortages for industries reliant on imported raw materials.
Is Dependency Still a Reality?
When examining Trade War 2.0, it becomes evident that the United States cannot fully sever its dependency on China. Data on U.S. import values based on its five largest trading partners from 2014 to 2023 consistently show that China has remained the United States’ largest trading partner for most of that period. By the end of 2023, however, Mexico overtook China, registering U.S.$480.1 billion in trade compared to China’s U.S.$448 billion. Other major partners included Canada (U.S.$431.2 billion), Germany (U.S.$163.1 billion), and Japan (U.S.$151.6 billion) (Katadata, 2025). This enduring interdependence explains China’s confidence in retaliating, recognizing that American businesses and consumers continue to heavily rely on Chinese imports.
U.S. Import Values by Top 5 Trading Partner Countries (2014–2023)
Source: (Katadata, 2025)
Economic Perspectives: Insights from Stiglitz and Krugman
Based on the data presented above, China has been emboldened to pursue retaliation, believing that such measures could, in fact, pose significant difficulties for the United States itself. This view is further supported by statements from two prominent U.S economists, Joseph Stiglitz and Paul Krugman, who have critically assessed the potential consequences of Trade War 2.0 (Greenhouse, 2025):
- Joseph Stiglitz – argued that the actions taken by the United States would ultimately harm the country itself, as President Donald Trump’s policies could lead to slower economic growth and a decline in investment levels. Moreover, there is concern that other countries, beyond China, may also retaliate against U.S. policies. The price increases caused by tariffs could prompt central banks, such as the Federal Reserve, to raise interest rates, which would be further compounded by the slowdown in economic growth. This situation could result in stagflation, a condition characterized by high inflation occurring simultaneously with economic stagnation. The effects could be particularly severe for developing countries, where increased imports of consumer goods from China are expected to weaken demand for their own domestic products.
- Paul Krugman – in line with Stiglitz’s perspective, emphasized that while tariffs might not directly trigger a recession, they would nonetheless generate uncertainty, particularly through sudden changes in trade policy. This uncertainty could erode business and consumer confidence, dampen consumption, reduce investment, and slow economic expansion.
Is a ‘Global Broker’ Needed?
In this context, the emergence of a ‘Global Broker’ – countries or international organizations that act as intermediaries to stabilize global economic tensions has become increasingly crucial. Entities such as the World Trade Organization (WTO), the International Monetary Fund (IMF), and the European Union (EU) are expected to mediate these tensions and promote multilateral solutions (Midfa, 2025).In addition to the idea of a “Global Broker,” several countries, particularly developing countries, have already begun seeking ways to reduce their dependence on these two major powers by turning to alternative partners such as India and Brazil to expand their economic influence in the global market. Developing countries also need to strengthen cooperation, foster innovation, and adopt multilateral approaches to promote sustainable economic stability and growth.
United States vs. China: Who Will Win?
Strengths and Weaknesses
There will be “No Absolute Winner” in this trade war. Instead, we are witnessing a transformation from globalization to geo-economic blocs. Trade War 2.0 has made it clear that the world’s economies are deeply interconnected, and there is a shift underway from the dominance of free trade toward rising protectionism (Miller, 2025). Both countries are now competing for supremacy in digital technology sectors such as semiconductor chips, Artificial Intelligence (AI) hardware and software (Reed, 2025).
The winner of this trade war is not as straightforward as it may seem. On one side, the United States continues to play a dominant role in the global economy, maintaining leadership in the financial system, global trade, technology, and military power. Furthermore, the United States safeguards the value of the U.S. dollar as the world’s primary reserve currency, enabling it to be widely used in international transactions, but the United States also remains heavily dependent on China’s global market.
On the other side, China is emerging as a new global power with a strong focus on technology and infrastructure development. China is advancing its strategic influence by forming alliances with developing countries through the Belt and Road Initiative (BRI) and by introducing the Cross-Border Interbank Payment System (CIPS) in 2015 as part of its efforts to promote the use of the yuan (renminbi) in international transactions (CIPS, n.d.).
Most importantly, China has been strengthening its domestic technological capabilities through initiatives such as “Made in China 2025,” targeting advancements in semiconductors, Artificial Intelligence (AI) hardware and software. Nevertheless, China still faces significant hurdles, including its reliance on international markets and ongoing challenges in matching and surpassing U.S. military supremacy.
Conclusion: Survival, Not Victory
Thus, the most relevant question as we witness Trade War 2.0 is not about:
“Who will be the winner?”
But rather:
“Who will survive, and how will the world be reshaped because of this Trade War 2.0?“
If we analyze Trade War 2.0 through the lens of ‘Global Hegemony’, dominance is no longer solely defined by economic or military superiority. More importantly, adaptability, resilience, collaboration, and innovation in addressing complex global challenges will define the true leaders of the future world order.
In essence,
“Trade War 2.0 is less about who wins and more about who can best navigate global uncertainty—and who will be the first to successfully rewrite the rules of the 21st-century global order, allowing them to play on a ‘chessboard’ they have designed themselves.”
References
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Kleintop, J. (2024, 29 Juli). Charles Schwab. Retrieved from Trade War 2.0: Should Investors Prepare?: https://www.schwab.com/learn/story/trade-war-20-should-investors-prepare
Kubota, Y. (2024, Juni 03). The Wall Street Journal. Retrieved from The Goal for China’s Chip Giant: Cut Out the U.S.: https://www.wsj.com/tech/chinese-semiconductor-industry-smic-self-sufficient-5210abf8
Midfa, N. A. (2025, Februari 05). Trends Research and Advisory. Retrieved from The U.S.-China Trade War: China’s Challenge in Navigating U.S. Tariffs and Global Trade Tensions: https://trendsresearch.org/insight/the-u-s-china-trade-war-chinas-challenge-in-navigating-u-s-tariffs-and-global-trade-tensions/
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Reed, B. (2025, April 13). The Guardian. Retrieved from Trump Warns Exemptions on Smartphones, Electronics Will be Short-Lived, Promises Future Tariffs: https://www.theguardian.com/us-news/2025/apr/14/trump-warns-exemptions-on-smartphones-electronics-will-be-short-lived-promises-future-tariffs-president-china