The Hidden Costs of U.S China Trade War
The US China trade war, which began in 2018 under the administration of former President Donald Trump, has escalated dramatically in 2025 with new tariffs that now exceed 145% on some imports from China. This move comes despite growing evidence that such policies have historically imposed significant costs on the American economy. According to the U.S. Census Bureau, the trade deficit between the United States and China stood at $263.3 billion in 2024, with US exports to China totaling $199.2 billion while imports reached $462.5 billion. Proponents of tariffs argue that this imbalance justifies aggressive action, but economists across the political spectrum caution that trade deficits are not inherently harmful and do not signal economic weakness.
Since the first round of tariffs in 2018, American businesses and consumers have borne the brunt of the economic fallout. A 2021 study by the Federal Reserve Bank of New York, Columbia University, and Princeton University found that the tariffs cost US consumers and companies at least $1.4 billion per month in direct costs, not including retaliatory measures. Despite these losses, the Trump administration has framed the conflict as an “easy win,” a belief now echoed by Treasury Secretary Scott Bessent. However, the latest round of economic data suggests otherwise. Inflationary pressures are rising, supply chains remain vulnerable, and foreign investment in the US is declining. The continuation of this policy path raises urgent questions about the real costs of escalation and whether the US economy is prepared for the long-term consequences.
In 2018, former US President Donald Trump famously tweeted that “Trade wars are good, and easy to win.” At the time, the administration began imposing a series of tariffs on goods imported from China. In 2025, that policy has intensified with new tariffs exceeding 145 percent, reigniting a more aggressive phase of the trade war.
US Treasury Secretary Scott Bessent recently defended these escalations, arguing that China’s retaliation is ineffective. According to him, since the United States exports only a fraction of what it imports from China, it holds the advantage. “What do we lose by the Chinese raising tariffs on us?” he asked, implying that Beijing is playing a weak hand. However, economic realities tell a different story.
Trade wars inflict harm on both sides. According to the Peterson Institute for International Economics, the US China tariff war that began in 2018 resulted in a net loss of about 300,000 American jobs by 2020. Both countries suffered reduced trade volumes and increased costs. When the United States raises tariffs, it raises costs for American businesses and consumers who rely on those imported goods. A 2023 study by the Congressional Budget Office estimated that continued tariffs on Chinese goods could reduce US GDP by 0.3 percent annually over the next five years.
The Trump administration’s reliance on bilateral trade deficits as a measure of strength is economically misleading. In 2024, US exports to China stood at $199.2 billion, while imports from China reached $462.5 billion, creating a deficit of $263.3 billion. Trump’s team argues that a larger deficit gives the US leverage, but this contradicts standard economic theory. Countries with trade deficits are more dependent on foreign suppliers and are more vulnerable to supply disruptions.
China has an edge because it produces many goods that the United States cannot currently produce affordably or in sufficient quantity. For instance, China supplies over 80 percent of rare earth minerals used in electronics, renewable energy systems, and military equipment. These minerals are critical and not easily replaceable in the short term.
According to the US Geological Survey, China refined 85 percent of the world’s rare earths in 2023. Furthermore, China produces over 60 percent of the world’s semiconductors used in low-end electronics. Cutting off this supply without ready domestic alternatives exposes the US economy to serious risks.
American industries reliant on Chinese imports face mounting pressure. For example, the automotive and electronics sectors depend on inexpensive components from China. The Semiconductor Industry Association noted that a sustained tariff environment could increase production costs for US tech firms by 25 percent or more. Additionally, rising tariffs are fueling inflation. The US Bureau of Labor Statistics reported a 6.2 percent increase in the price of durable goods in 2024, attributing much of the rise to trade barriers. Simultaneously, wages have not kept pace with inflation, eroding consumer purchasing power.
The Trump administration’s aggressive stance has also spooked investors. In 2024, foreign direct investment in the US fell by 12 percent according to the Department of Commerce, reflecting investor unease about policy instability and trade friction.
One often overlooked aspect of the trade war is its impact on national security. The United States depends on China for not only consumer electronics but also pharmaceutical ingredients, defense materials, and industrial inputs.
For example, over 90 percent of antibiotics used in the United States originate from China or use Chinese raw materials, according to the US Food and Drug Administration. A sudden disruption in this supply chain would leave hospitals vulnerable and impact public health. Similarly, many components used in missile systems, jet fighters, and naval equipment contain materials that are either sourced from China or processed there. A 2023 report from the Department of Defense emphasized the need to build secure and resilient supply chains for national defense.
The Trump administration’s trade war with China is based on a flawed understanding of trade dynamics. The assumption that the United States can “win” because of a trade deficit ignores the deeper economic ties and mutual dependencies that define global commerce. Without serious investment in domestic production and a comprehensive strategy to diversify imports, the current approach could trigger inflation, reduce investment, and ultimately weaken the US economy. A sustainable path forward requires cooperation, resilience planning, and a recognition that economic power lies not in bluster, but in preparedness.
