A New Trade War Begun? U.S.–China Tensions Back in the Spotlight

[Redator]

• Renewed U.S.–China tensions: Escalating sanctions and trade restrictions spark fears of a new wave of economic confrontation
• China’s economy under pressure: Weak domestic indicators and limited government stimulus highlight mounting internal challenges
• Global implications: Rising risk of supply chain disruptions, resource shortages, and deeper geopolitical fragmentation

In recent weeks, trade tensions between the United States and China have visibly intensified, raising fears of a new wave of economic conflict between the world’s two largest economies. Rhetoric on both sides has become increasingly confrontational, and the growing risk of decoupling and disruptions to supply chains could have far-reaching consequences for the global economy.

China Responds with Sanctions – Tensions After Madrid Talks

The immediate catalyst for the escalation was the round of talks in Madrid, after which the United States expanded sanctions against companies linked to Chinese entities on the so-called “blacklist.” In response, Beijing announced sanctions against American firms cooperating with South Korean company Hanwha — including Philly Shipyard, which fulfills contracts for the U.S. Navy. Chinese authorities justified the move as a countermeasure to the deepening defense cooperation between the U.S. and South Korea.

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Daily chart USDCNH, source: TradingView

Negotiation Climate Weakens, But Formal Frameworks Remain

China’s Minister of Commerce, Wang Wentao, accused the U.S. of “destroying the constructive atmosphere for negotiations” and called for an immediate withdrawal from what he termed “erroneous trade practices.” At the same time, China announced it would release a report within the WTO evaluating U.S. actions in 11 areas of international trade.

Meanwhile, U.S. Treasury Secretary Scott Bessent warned that China’s restrictions on the export of rare earth metals could accelerate the global process of economic decoupling — the effort to reduce dependency on Chinese supply chains.

Trump: 100% Tariffs Possible, But Undesirable

President Donald Trump signaled that 100% tariffs on Chinese goods were possible if tensions continue to escalate, though he sought to calm markets by noting that “both leaders do not want a global recession.” The planned Trump–Xi meeting during the upcoming APEC summit in South Korea could prove decisive for the future of bilateral relations.

Trade Dispute Deepens China’s Economic Troubles

The escalation comes at a difficult moment for China’s economy. Despite record exports (trade surplus: USD 875 billion), GDP growth in Q3 is projected at just 4.7% year-on-year — potentially the weakest result in a year.

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Chinese quarterly GDP (annualized), source: TradingView

Domestic indicators are also disappointing:

• Retail sales (September): +3% y/y – the weakest result in 2025
• Industrial production: +5%, with slowing momentum
• Fixed-asset investment: near zero growth
• Foreign direct investment: down 13% over the past eight months
• Real estate sector: still in recession, with deflation for the ninth consecutive quarter

Government Support Falls Short

The Chinese government has launched a 500-billion-yuan investment package, focused mainly on infrastructure. However, a large share of the funds has gone toward repaying previous obligations, limiting the actual stimulus effect.

Ahead of the upcoming plenum of the Chinese Communist Party, new measures to boost consumption are expected. Household consumption currently accounts for only 40% of GDP — well below the global average of 56% and the roughly 60% level typical for developed economies.

A New Wave of Trade War?

Analysts warn that further escalation could trigger a new round of trade warfare, hitting global supply chains, access to strategic resources, and financial market stability. Although the formal negotiation framework established in London remains in place, sentiment on both sides is increasingly confrontational.

While a full-scale trade war is not yet inevitable, the current escalation signals that U.S.–China relations are entering a new phase of uncertainty. High-level meetings and potential decisions on further restrictions remain at the center of global attention. For the world economy, this is a test of resilience in a new geopolitical reality — one in which trade is no longer just about economics.

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