From soybeans to semiconductors—China’s tariff hike hits U.S. where it hurts

China has raised tariffs on a range of U.S. imports to 125%, marking one of the most severe escalations in the ongoing trade war between the United States and China. This move comes in direct response to Washington’s latest decision to increase tariffs on Chinese goods to 145%, under a revised trade framework imposed by U.S. President Donald Trump’s administration. In what Beijing has termed a “forced retaliatory measure,” the increase signals a deteriorating bilateral trade relationship that is once again becoming a flashpoint for global economic uncertainty.

According to a statement from China’s Ministry of Finance, the new tariff rate will be applied to American goods starting April 13, 2025, and will cover key export categories such as agricultural produce, electronics, vehicles, and chemical products. The Ministry condemned the U.S. action as “unilateral bullying” and asserted that the new measures are necessary to defend China’s economic interests and preserve the multilateral trading system. Beijing also accused the U.S. of undermining global supply chain stability and violating World Trade Organization (WTO) rules.

How does this escalation fit into the history of the U.S.-China trade war?

The current round of tariff hikes is the most intense flare-up since the original U.S.-China trade war erupted in 2018. At the time, former President Donald Trump initiated a broad wave of tariffs aimed at correcting what he called China’s unfair trade practices and intellectual property theft. China quickly retaliated with tariffs of its own, leading to a tit-for-tat escalation that disrupted global trade flows and stoked fears of a recession.

Although both nations agreed to a Phase One trade deal in early 2020, which temporarily eased tensions, the agreement was seen as a partial truce rather than a full resolution. Most tariffs remained in place, and disagreements over tech transfers, subsidies, and market access persisted. With Trump’s return to power in 2025, the administration has moved swiftly to reinstate hardline measures. Citing persistent trade imbalances and national security risks, the White House pushed through a new wave of tariffs that significantly increased duties on over $500 billion worth of Chinese imports.

What sectors are most affected by China’s retaliatory tariffs?

China’s 125% tariff hike targets several U.S. sectors that are heavily reliant on exports to the Chinese market. These include soybeans, corn, pork, and dairy from American farmers, who had only just begun to recover from the economic damage caused by the first trade war. The aerospace and automotive industries are also expected to face substantial cost pressures, as many U.S. companies depend on China both as a market and a supply chain partner.

U.S. tech companies, which had started to see renewed chip and hardware orders from China after earlier restrictions were lifted, now face uncertainty as Beijing may introduce further measures such as export controls, tech license reviews, and cyber-related restrictions. The Chinese Ministry of Commerce has already hinted at possible limits on strategic mineral exports, including rare earths critical for semiconductors and electric vehicle batteries.

What are the implications for global markets and trade flows?

The impact of the U.S.-China tariff escalation has already begun to reverberate across global financial markets. The S&P 500 and Dow Jones Industrial Average posted their largest two-day losses since the COVID-19 market crash in March 2020. Investor sentiment has been rattled by concerns over renewed inflationary pressure, supply chain disruption, and declining corporate margins. On the Asian side, key indices in Shanghai, Hong Kong, and Tokyo also registered sharp declines as risk appetite diminished.

Economists warn that the extended tariff standoff could trigger stagflation in major economies, as higher prices for goods reduce consumer spending power even while growth slows. Central banks, already grappling with tight monetary policy environments, may find themselves with fewer tools to manage inflation without derailing economic recovery.

Global supply chains are also under renewed stress. The shift toward “de-risking” and nearshoring, already in motion since the COVID-19 pandemic, is likely to accelerate as companies rethink their dependence on U.S.-China trade corridors. Some manufacturing hubs, including Vietnam, Mexico, and India, may see a short-term boost as firms seek alternative sourcing options. However, the broader impact is expected to be negative due to increased uncertainty, reduced trade efficiency, and higher logistics costs.

How are both governments justifying their positions?

The Trump administration has framed the tariff increases as essential for protecting American jobs and ensuring a level playing field for domestic industries. Officials have pointed to persistent trade deficits with China, alleged state-sponsored cyberattacks, and intellectual property violations as justification for the tariffs. In recent remarks, Trump warned that “China has had a free ride for too long,” and vowed to correct decades of “unfair treatment.”

In contrast, Chinese authorities have positioned their response as defensive and legally grounded under WTO frameworks. The Ministry of Commerce described the new tariffs as proportionate and necessary to protect China’s economic sovereignty. Officials further stated that the measures are part of a broader policy strategy aimed at reducing dependence on the U.S. and building resilience in domestic consumption and innovation.

Despite the hardline rhetoric from both sides, Beijing has indicated it does not plan to raise tariffs further unless provoked. Nonetheless, Chinese state media has warned that the country “will not flinch in the face of aggression,” echoing past Maoist slogans and emphasizing the need for economic self-reliance.

What role is the World Trade Organization playing in the conflict?

Both the United States and China have brought their grievances before the World Trade Organization, although the WTO’s capacity to resolve the dispute is limited. The U.S. has effectively paralysed the organization’s appellate body by blocking new appointments, while China has expressed scepticism about the body’s ability to enforce rulings.

Despite these challenges, China has submitted formal complaints regarding the 145% U.S. tariffs, arguing that they violate the most-favoured-nation principle and represent an excessive, non-transparent use of trade remedies. Meanwhile, Washington has justified its actions under Section 301 of the Trade Act of 1974, claiming the right to impose tariffs unilaterally when foreign practices are deemed unfair or harmful.

Trade experts warn that the erosion of multilateral dispute resolution mechanisms could weaken the global trade system and encourage further unilateralism, increasing the risk of fragmentation in the global economy.

What’s next in the U.S.-China trade conflict?

While neither side has yet announced a new round of tariffs beyond the 125% and 145% rates, the situation remains volatile. Analysts suggest that both countries are posturing for leverage ahead of potential trade talks. However, given the highly nationalistic tone adopted by leaders in both capitals, expectations for a near-term resolution are low.

The longer the standoff persists, the greater the likelihood of economic fallout—not just for China and the United States, but for the broader global economy. Businesses, consumers, and policymakers are bracing for continued volatility, higher input costs, and reduced global growth forecasts.

Amid rising tensions, industry groups on both sides have begun lobbying their respective governments to return to negotiations. In Washington, business lobbies are urging the administration to consider the cost burden on American firms and consumers, while in Beijing, think tanks are calling for diversification of export markets and import substitution strategies.

The U.S.-China tariff war, now entering a new phase of escalation, threatens to redefine global trade patterns for years to come—unless a shift in political will or economic necessity pushes both powers back to the negotiating table.