Trade War 2.0: United States vs. China—Who Will Be the Winner?
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): 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
Asia-Pacific After November 2024: How Trump’s Victory Means for US-China-Taiwan Relations
On November 5, 2024, the United States held another presidential election in which Donald Trump managed to secure the position of number one person in the United States. Not much different from his first term as president, Trump continues to glorify protectionist foreign policies to make America great again. Stronger border for immigrants, scathing rebuke of NATO, and higher trade tariff with certain countries are becoming his top agenda. Therefore, it is imperative to pay attention to how Trump’s second victory can affect the global situation, especially the Asia-Pacific region, which is currently in the spotlight given the potential for a military conflict such as that between China and Taiwan. Meanwhile, Trump’s victory is also closely watched by Asian-Pacific leaders, including China and Taiwan, who have experienced turbulence in their relations with the United States during the first Trump years. TRUMP’S CHINA AND TAIWAN FOREIGN POLICY FLASHBACK Since 1979, when the United States shifted its diplomatic recognition from Taiwan to China, it has developed a stable relationship with both Chinese nation-states. For Taiwan, in fact, the United States is its closest ally that Taiwanese society and leaders believe will assist The Island to resist Chinese military incursion (Wu & Lin, 2022). Nevertheless, under the first Trumpian administration, Washington has taken a different approach to dealing with Beijing and Taipei, including addressing the longstanding conflict between the two. Since the beginning of his candidacy, Trump accused China of being ‘a currency manipulator,’ as the United States often run a trade deficit with China, and pledged to address this issue once he was elected as president. Graph 1. U.S. Trade with China Source: (Buchholz, 2019) Making good on his campaign promise, Trump initiated the establishment of trade tariffs against China’s goods starting in 2018, and was responded to by China with a tit-for-tat strategy that eventually led to a trade war between the two global economic giants. Despite the consequences – it was reported by UN economists that the trade war has hurt the countries involved and the global economy – the trade tensions continued until Trump’s first term ends in 2021. In the era of Trump’s leadership, Taiwan also faced American policies that could be described as strategic ambiguity in a more unfriendly posture. Strategic ambiguity itself can be understood as a policy that reflects uncertainty over whether Washington would go to war in the event of Chinese aggression against Taiwan (Kuo, 2023). Therefore, this article contends that this strategy could be characterized as a more unfriendly move toward Taiwan, since even though Trump had a phone conversation with Tsai-ing Wen – the then-president of Taiwan – Trump reiterated that the United States remained committed to the principle of the One-China Policy (Scott, 2017). In addition, on the one hand, the first meeting between Donald Trump and Xi Jinping in April 2017 resulted in several positive agreements on bilateral trade issues and the North Korean nuclear project, which was expected to improve the relationship between the two major powers. ‘We have made tremendous progress in our relationship with China. We will be making additional progress. The relationship developed by President Xi and myself I think is outstanding. And I believe lots of very potentially bad problems will be going away’ Donald Trump’s statement after his first meeting with Xi Jinping (Holland & Qing, 2017). However, on the other hand, the United States announced arms sales with Taiwan worth $1.42 billion, $330 million, and $550 million in 2017, 2018, and 2019, respectively (John F, 2017; Reuters, 2019). To sum up, the United States’ gesture toward Taiwan then was very pragmatic – highly influenced by American interests toward China – similar to when the United States decided to shift diplomatic recognition from Taiwan to China during Jimmy Carter’s presidency. TRUMP’S SECOND VICTORY: HOW IT MIGHT SHAPE THE U.S.-CHINA-TAIWAN RELATIONS Donald Trump’s victory has been the subject of a mixed bag of commentary from international relations scholars on what effect the result of U.S. 2024 election will have on China and the Taiwan issue. Indeed, Trump’s isolationist tendency might impose a mixed negative and positive outcomes. For China, as it seeks greater influence in the international system, Donald Trump’s policy of disengaging from or reducing the U.S. contribution to some international cooperation, such as with Japan, the Trans-Pacific Partnership, and NATO, might make it easier for China to carry out its expansive foreign policy without strong pressure from the United States. On the Taiwan question, China may also benefit from Donald Trump’s leadership. Although the US-Taiwan arms sales cooperation is most likely to continue, Trump seems to be more pragmatic when it comes to protecting Taiwan, since he mentioned that Taiwan ‘does not give the country [the United States] anything’ and that Taiwan should pay for the U.S. protection over the self-ruled island (Davidson, 2024). Nevertheless, the Chinese government cannot afford to ignore the trade war, which is likely to intensify in the second term of Donald Trump’s presidency. It comes after Donald Trump pledged to increase duties on Chinese goods by 45 percent. Economic issues are also being considered by Donald Trump as a means of “pressure” on China not to invade Taiwan. ‘I would say, “if you go into Taiwan, I’m sorry to do this, I’m going to tax you, at 150% to 200%”. I had a very strong relationship with him [Xi Jinping]. I wouldn’t have to [use military force], because he [Xi Jinping] respects me and he knows I’m f— crazy’ (Donald Trump statement during his interview with the Wall Street Journal) (Singh, 2024). This economic approach is quite different from Biden’s commitment to the mobilization of the U.S. military in support of Taiwan’s resistance to a Chinese invasion (Brunnstorm & Hunnicutt, 2022). Taiwan, similiar with China, is waiting to see how Trump’s policies will affect the relationship between the two governments and cross-strait relations. As mentioned above, Trump’s policy on the Taiwan issue is based on a pragmatic and transactional approach which means that the Taiwanese government will have to make more efforts to convince the Trump administration
Indonesia’s Foreign Policy in Shaping Indo-Pacific Geostrategy Through RCEP
The difficulty of reaching agreements through the World Trade Organization (WTO) has led world leaders to seek alternative means of trade cooperation, such as Regional Trade Agreements (RTA). Thomas Oatley (2012) views RTA as a more promising way to negotiate and implement trade agreements. RTA is a way to enhance a country’s market access with a crucial trading partner, indicating a strong commitment to economic reform to attract foreign investors. RTA aims to bolster bargaining power as a group in multilateral trade negotiations and it is easier to establish than global trade agreements, which involve a larger number of countries with diverse interests. While operating on a regional scale, RTAs can have implications for global trade governance (Oatley, 2023). Starting in 2000, world leaders, including the Indo-Pacific region, have considered various frameworks for establishing RTA. One result of this thinking is the Regional Comprehensive Economic Partnership Agreement (RCEP). RCEP was initiated by Indonesia as the chairman of ASEAN in 2011. RCEP involving 10 ASEAN member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and 6 non-ASEAN countries which already have a Free Trade Agreement with ASEAN (Australia, China, India, Japan, New Zealand, and South Korea) (Oba, 2016). However, India decided to withdraw from RCEP in 2019. Despite the delays and hurdles in the ratification process due to the Covid-19 pandemic, RCEP came into force for Indonesia on 2 January 2023, coinciding with the start of Indonesia’s ASEAN Chairmanship. RCEP encompassed various aspects such as trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute resolution, e-commerce, and support for small and medium enterprises in ASEAN member States and ASEAN trade partners (ASEAN, 2023). RCEP AND ITS VAST POTENTIAL Beyond trade, the Indo-Pacific has emerged as a concrete area for regional cooperation across various fields. Increased RTA will certainly help in reshaping policies in the region. Such advantages place the Indo-Pacific as the foremost channel for economic collaboration. It is important for Indonesia to place itself as the pivotal country to expand markets and integrate Indonesia’s economy into the Regional Value Chain and Global Value Chain through RCEP (Gultom, 2020). Especially, RCEP serves as the umbrella for ASEAN’s economic collaboration with partner countries which creates a favorable economic climate in the region. It has the potential to create spill-over effects that can enhance Indonesia’s efforts in achieving its interests (Springer, 2021). Collectively, RCEP represents a significant market. It covers 30.2% of the total world GDP and 30% of the world’s population, with 27% of global trade and 29% of world FDI. This vast potential suggests that RCEP could offer substantial opportunities for its member countries. RCEP is expected to attract more foreign direct investment to Indonesia from both local and foreign sources. Because of its vast market with great potential, Indonesia sees RCEP as a productive framework to thrive. It is more than just a trade agreement, it is a comprehensive economic cooperation pact that enhances security, regional political stability, and reinforces ASEAN’s centrality in Southeast Asia and the Indo-Pacific (Maulana, 2021). INDONESIA’S FOREIGN POLICY IN UTILIZING RCEP Various geopolitical debates surround the running of RCEP especially when Indo-Pacific Economic Framework for Prosperity (IPEF) was initiated not long after. Amid the economic tensions between the US, which is part of the IPEF, and China as a member of RCEP, both partnerships in the Indo-Pacific region are seen as a battlefield and competition arena for major powers to expand their influence. However, Indonesia emphasized that RCEP does not stand as a competitor, but rather RCEP as a balancing act (Kavanagh & Cuéllar, 2024). Therefore, the further path of RCEP must be cautious given that the US and China each have partnerships in Indo-Pacific. Indonesia and member countries need to pay close details to prevent new tensions and ensure it can serve as a mediator by establishing a free and open order based on the principles of the rule of law. RCEP is a great opportunity for Indonesia to lead the middle power in geostrategy. Beside as the initiator, Indonesia is also a key coordinator in the RCEP negotiations with unwavering commitment to prioritizing collective regional development to sustain trade, coupled with domestic reforms aimed at eliminating trade barriers, particularly within the RCEP framework (Patunru & Aprilianti, 2020). As a pivotal member of ASEAN, Indonesia also holds the potential to contribute significantly to maintaining geopolitical stability and collaboration in bridging differences and adherence to principles. Indonesia encourages the participation of ASEAN to become a bridge between large and small countries in discussing the emerging Indo-Pacific strategic concept. Indonesia wants RCEP to reflect the value of its initiator, which allows members to have their opinion and enter the partnership formally on their terms. Not to forget that RCEP is an ASEAN-driven initiative and with barriers being lifted, ASEAN member states have the opportunity to diversify their trading partners, thereby bridging any country (Sandrina & Prastyono, 2024). Being a member of RCEP is a step towards implementing Indonesia’s foreign policy in promoting regional stability and advancing shared interests over time. Compared to others, Indonesia’s policy in the Indo-Pacific region is more inclusive, less overtly geopolitical, and places a stronger emphasis on collaboration. Indonesia’s commitment and participation in RCEP is by promoting free and active foreign policy with an orientation towards national interests and world peace. This foreign policy is not transactional, rather it is rooted in principles and long-term strategic objectives. Through this foreign policy, Indonesia wants to include all actors without isolating any particular player and maintaining the principle of neutrality by fostering peaceful economic relations with both the US and China (Agastia, 2020). In particular to free and active foreign policy, Indonesia will show neutrality by not favoring any particular actor and will cooperate with every country. And as a developing country, Indonesia will have the potential to bridge other developing countries with major powers. There is no reference to how the RCEP should proceed or develop, especially its unprecedented size and member composition.