A full-scale trade war with China and the US is in prospect after President Donald Trump threatened to impose tariffs of more than 100% on Chinese goods imports from Wednesday 9 April.
China has said it will “fight to the end” rather than capitulate to what it sees as US coercion, and has already raised its own trade barriers against the US in response.
What does this escalating trade conflict mean for the world economy?
How much trade do they do?
The trade in goods between the two economic powers added up to around $585bn (£429bn) last year.
Though the US imported far more from China ($440bn) than China imported from America ($145bn).
That left the US running a trade deficit with China – the difference between what it imports and exports – of $295bn in 2024. That’s a considerable trade deficit, equivalent to around 1% of the US economy.
How might this affect other countries?
The US and China together account for such a large share of the global economy, around 43% this year according to the International Monetary Fund.
If they were to engage in an all-out trade war that slowed their growth down, or even pushed them into recession, that would likely harm other countries’ economies in the form of slower global growth.
Global investment would also likely suffer.
There are other potential consequences.
China is the world’s biggest manufacturing nation and is producing far more than its population consumes domestically.
It is already running an almost $1tn goods surplus – meaning it is exporting more goods to the rest of the world than it imports.
And it is often producing those goods at below the true cost of production due to domestic subsidies and state financial support, like cheap loans, for favoured firms.
Steel is an example of this.
There is a risk that if such products were unable to enter the US, Chinese firms could seek to “dump” them abroad.
While that could be beneficial for some consumers, it could also undercut producers in countries threatening jobs and wages.
The lobby group UK Steel has warned of the danger of excess steel potentially being redirected to the UK market.
The spillover impacts of an all-out China-US trade war would be felt globally, and most economists judge that the impact would be highly negative.
Source: BBC
