Escalating US-China Trade War Impacts Economy and Beyond

US tariffs imposed by President Trump on Chinese goods have brought many Chinese small businesses to a standstill, with orders from the US being put on hold. Companies such as Sorbo Technology, which sells mosquito repellent kits, and Guangdong Sailing Trade Company, which sells ice cream makers, have stopped production and are now holding large quantities of stock in warehouses. The tariffs have affected around half of Sorbo Technology's products, which were previously sold to Walmart stores in the US. Many businesses at the Canton Fair in Guangzhou are now looking to diversify and find new markets, such as Europe, Saudi Arabia, and Russia. However, China's economy, which is export-driven, is likely to feel the pain of the trade war, with millions of workers potentially affected. Some workers in Guangdong province have already seen their wages decrease significantly due to the decline in exports.

China has replaced its top international trade negotiator, Wang Shouwen, with Li Chenggang, as trade tensions with the US continue to escalate. Li, who has extensive experience in trade issues, will serve as vice minister of commerce and a top representative for international trade negotiation. The move comes as both countries have ratcheted up tariffs, with the US imposing a cumulative 145% tariffs on Chinese imports and China retaliating with tit-for-tat tariff increases of up to 125%. The US has said it is open to a trade deal, but wants China to make the first move.

The US-China trade relationship is on the brink of a "decoupling" or a significant reduction in trade, with the World Trade Organization predicting an 80% fall in US-China trade. The Trump administration's tariffs and China's retaliatory measures have already caused significant economic damage, including a hit to US retail sales, Boeing's exports, and Nvidia's sales to China. The situation is further complicated by China's restrictions on rare earth mineral exports and its efforts to "weaponize" its imports. The US and China appear to be heading towards a messy divorce, with the US potentially trying to pressure other nations to curb trade with China, and China positioning itself as a "respectable stakeholder" in global trade while combating US aggression.

The escalating trade war between the US and China is affecting more than just economic ties, with cultural and educational exchanges also being impacted. China has warned its citizens to think twice before visiting the US, advised students to be cautious about studying there, and vowed to limit the number of Hollywood films shown in China. The US has revoked some Chinese student and scholar visas, and conservatives have suggested linking student visas to the trade dispute. For decades, the flow of students, travelers, and businesspeople between the two countries had served as a stabilizing force, but now these ties are being turned into bargaining chips. Scholars and experts warn that the situation is becoming increasingly fragile and that an emotional reaction could lead to a full-on conflict.

China's economy grew 1.2% in the first quarter of 2025, driven by a surge in exports ahead of President Trump's tariffs, but the growth is uncertain as the tariffs, which reached 145% on many Chinese exports to the US, are expected to have a substantial effect on China's exports going forward. Economists expect policymakers to adopt measures to offset the effects, such as increasing domestic consumer spending, but Chinese consumers are wary of spending due to the housing market crash, which has led to a loss of wealth and a culture of frugality. China's leaders have vowed to bolster consumers, but a sharp devaluation of the renminbi could trigger financial instability.

American consumers are stocking up on cheap goods from Chinese e-commerce companies Shein and Temu ahead of a May 2 tariff deadline, as the Trump administration is set to end a trade loophole that allowed duty-free delivery of low-cost goods from China. The new tariffs, which could add fees equivalent to 120-145% of the value of the goods, are expected to significantly increase prices for consumers who have grown reliant on the companies' low prices. Shein and Temu have become popular among Americans, with many using TikTok to share their shopping experiences and warn others about the impending price increases. The companies have posted notices on their websites warning of price adjustments, and TikTok has also notified its sellers of the changes. The tariffs are intended to combat drug smuggling and other illicit activities, but consumers are worried about the impact on their wallets, particularly low-income households who have come to rely on the cheap goods.

A report by the European Union Chamber of Commerce in China warns that foreign firms are at risk of losing their technological edge and market share in China due to the country's "Made in China 2025" initiative, which aims to make China self-sufficient in critical technologies. The report cautions that China's continued use of such policies may lead to increased trade tensions and marginalize foreign companies in strategic sectors once Chinese companies have comparable technology.

US President Donald Trump has pressed China to make a tariff offer to resolve the escalating trade fight between the two economies, with the White House stating that "China needs to make a deal with us. We don't have to make a deal with them." The comments come amid rising trade tensions, with China retaliating against US tariffs by ordering airlines not to take further deliveries of Boeing jets.

China has appointed Li Chenggang as its new international trade representative at the Ministry of Commerce, replacing Wang Shouwen amid an escalating trade war with the US. Li, 58, has decades of experience in international negotiations and previously served as China's ambassador to the World Trade Organization. Analysts believe the appointment could be a sign that Beijing is seeking to break the impasse in negotiations with the US.

The firing of Chinese professor Xiaofeng Wang from Indiana University, alongside an FBI raid on his homes, has sparked fear among the Asian community of faculty and students in Bloomington. Wang was fired on the same day as the raid, but has not been charged with a crime. The incident has raised concerns about racial profiling and the targeting of Chinese academics and students, with some fearing a political motivation. Many Chinese students and researchers are worried that they could be next, and some are considering leaving the US. The incident has been linked to the renewed tensions between the US and China, with the Trump administration's policies being seen as hostile to Chinese students and academics. The university's decision to fire Wang without due process has been criticized by some, including MIT professor Gang Chen, who was himself charged with failing to disclose links to Chinese organizations in 2021 before having the charges dismissed.