US-China Trade War: Economic Fallout And Strategic Realignment

2025-04-10 03:20:31

(MENAFN- Asia Times) The intensifying trade war between the United States and China has moved beyond a bilateral economic dispute, evolving into a global geopolitical confrontation with profound implications for East Asia. The economic fallout from escalating tariffs is expected to have wide-ranging consequences, including the restructuring of global supply chains and a realignment of strategic relationships in the region.

Although the US launched the trade war in an effort to curb China's economic rise, the outcomes thus far indicate a reversal of those goals – strengthening China's position in global trade, eroding US influence among key regional allies, and accelerating the shift toward a multipolar order in East Asia.

It is time for Washington to pause and fundamentally reconsider its strategy.

Disruption of the post-war global trading order

The US-China trade war now represents the most significant disruption to the global trading system since the formation of the post-World War II liberal economic order. Triggered by the imposition of steep tariffs – up to 125% by the US and 84% by China – the conflict now affects over $650 billion in bilateral trade, encompassing a wide range of consumer and industrial sectors.

And this may be just the opening salvo. No one can say with certainty where both countries will ultimately end up, as neither side appears willing to back down

Initially intended to rebalance trade flows and counter China's perceived economic aggression, the trade war has instead generated widespread economic uncertainty and strategic dislocation – especially across East Asia.

The World Trade Organization projects an 80% reduction in US-China trade volumes, sending shockwaves through global markets. The OECD has revised its global GDP growth forecasts downward, predicting 3.1% growth in 2025 and 3.0% in 2026. US economic growth is expected to decline to 2.2% in 2025 and farther to 1.6% in 2026, reflecting not only trade-related headwinds but also rising inflation and waning investor confidence.

Tariffs have driven up import costs, particularly in sectors such as electronics, pharmaceuticals and retail. Financial markets have reacted negatively, with major stock indices experiencing notable declines.

Economic forecasts are becoming increasingly cautious, with growing concerns about the possibility of a recession. These trends point toward a heightened risk of stagflation – a troubling mix of economic stagnation and rising inflation.

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