Why the next trade war with China may look very different from the last one

Mrugank Bhusari

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In 2018, the United States initiated a series of tariffs against Chinese goods over a trade deficit and trade practices that it believed unfairly disadvantaged US industries. Nevertheless, according to Chinese data, the US deficit has only increased in the intervening years, and the aggregate global goods deficit with China has doubled from $420 billion in 2017 to $822 billion in 2023. As Beijing now prioritizes manufacturing products requiring more complex processes with a higher value added such as batteries, electric vehicles, and solar panels, more tariffs are likely regardless of the outcome of the US presidential election.

The 2018 US tariffs primarily targeted Chinese intermediate inputs and capital equipment. In 2025, far more countries will share concerns over the impact of an expansion of Chinese exports. This time, however, they are likely to target final consumer goods to shield domestic industries and avoid imposing costs on their own supply chains.

In 2023, 150 countries had a goods trade deficit with China. As the chart below shows, bilateral goods trade deficits for economies across the world and income levels have widened in 2023 as compared to 2017.