Reshaping Global Trade: The Evolving US-China Trade Dispute

The ongoing trade dispute between the United States and China continues to reshape global trade patterns, with far-reaching implications for economies worldwide. As we enter 2025, the landscape of international commerce is markedly different from when tensions first escalated in 2018.

China’s Declining US Market Share

Since 2017, China’s overall market share in the US has dropped significantly, falling by 7.7 percentage points to 13.9% in 2023. This decline has been particularly pronounced in sectors affected by tariffs:

• Leather goods: from 57.2% to 23.7%
• Furniture: from 52% to 29.4%

However, China has managed to increase its market share in specific areas such as animal and vegetable fats, tobacco, pharmaceutical products, and miscellaneous manufactured articles.

Beneficiaries of the Trade Dispute

As US-China trade in goods has declined, other countries have seen significant gains in their US import market shares between 2017 and 2023:

• EU: +2.4 percentage points
• Mexico: +2.1 percentage points
• Vietnam: +1.7 percentage points
• Taiwan, Canada, and South Korea: +1 percentage point each

Global Economic Impact

The trade dispute has not only affected bilateral relations between the US and China but has also reshaped global supply chains and trade flows. Bystander countries have seized opportunities to boost their global exports of goods subject to tariffs by the United States and China.A study published in the American Economic Review: Insights reveals that countries with exports that are substitutes for products targeted by US and Chinese tariffs saw significant growth, particularly those with greater ability to rapidly boost production .

Future Implications and Risks

As we look ahead, several factors could further complicate the global trade landscape:

1. Potential new tariffs: Proposals for escalating US tariffs against all trade partners, with exceptionally high tariffs on Chinese goods, could lead to significant economic costs.
2. Retaliatory measures: If implemented, such tariffs could trigger widespread retaliation, potentially creating a “trade siege” of “fortress America”.
3. Economic impact: A global trade war between the United States and the rest of the world at proposed tariff rates could cost the US economy over $910 billion, with a global efficiency loss of $360 billion.
4. Shifting alliances: The possibility of a transatlantic alliance, where Europe joins the United States in imposing tariffs against China, could reduce US losses but lead to sharp losses for China.
5. Currency manipulation concerns: Seven economies are currently on the US Treasury list for monitoring: China, Japan, Taiwan, Malaysia, Singapore, Vietnam, and Germany .

Conclusion

The US-China trade dispute has significantly altered global trade flows and market shares. As we enter a new era of protectionism with looming tariffs, the supply chain landscape will continue to evolve, presenting both challenges and opportunities for countries and businesses worldwide.The potential for escalation remains high, with proposals for even more aggressive tariffs being discussed. However, such measures could have severe economic consequences, not just for the US and China, but for the global economy as a whole.As uncertainty persists, businesses and policymakers must prepare for multiple scenarios, considering the complex interplay of trade policies, economic impacts, and geopolitical dynamics that will shape the future of global trade.

Sources:

1. https://www.brookings.edu/articles/is-anyone-winning-the-us-china-trade-war/
2. https://www.hellenicshippingnews.com/xeneta-trump-presidency-will-reignite-us-china-trade-war-and-threaten-a-spike-in-ocean-container-shipping-markets-as-businesses-rush-imports-ahead-of-higher-tariffs/
3. https://www.brookings.edu/articles/more-pain-than-gain-how-the-us-china-trade-war-hurt-america/
4. https://www.hellenicshippingnews.com/how-the-us-china-trade-dispute-is-redefining-global-trade/
5. https://www.brookings.edu/articles/u-s-china-economic-relations-implications-for-u-s-policy/
6. https://www.hellenicshippingnews.com/trade-war-ii-will-be-easy-to-lose-for-china/
7. https://www.brookings.edu/articles/implications-of-the-us-china-trade-dispute/
8. https://www.hellenicshippingnews.com/disputes-and-de-risking-us-china-trade-clash-changes-trade-flows/