Trade war and its impact

Trade wars aren’t fought on battlefields, but in boardrooms, stock markets, and shipping routes. In 2025, the U.S.-China trade war is no longer a negotiation tactic—it’s an economic battlefield with global repercussions.

After years of simmering tensions, the U.S. took an aggressive stance in late 2024, imposing steep tariff hikes:

• 100% tariffs on Chinese electric vehicles—a direct strike at China’s growing dominance in the EV market.
• 50% tariffs on solar cells and 25% on lithium-ion batteries, tightening restrictions on green energy components.
• Further crackdowns on Chinese AI and semiconductor firms, escalating the ongoing tech cold war.

China responded swiftly:

• New tariffs on key U.S. exports, including agricultural products and high-tech components.
• Tighter regulatory barriers for U.S. firms operating in China.
• An expanded trade agreement with Southeast Asia, accelerating its shift away from U.S. reliance.

Global Markets in Turmoil

The impact of the U.S.-China conflict is no longer limited to two superpowers—it’s rattling economies worldwide.

1. Supply Chain Disruptions: The Cost of Realignment

Manufacturers and multinational corporations are scrambling to redraw supply chains, avoiding costly tariffs while trying to maintain efficiency.

• Vietnam, India, and Mexico have emerged as alternative hubs for production, attracting billions in foreign investment.
• Shipping costs surged by 12% in Q4 2024, as companies rerouted goods through non-tariff-heavy corridors.
• Tech firms, particularly chipmakers and electric vehicle suppliers, are facing rising costs due to raw material restrictions.

A Slowing Global Economy: Growth Projections Cut

The IMF has slashed its 2025 global GDP forecast, citing trade tensions as a primary drag:

• U.S. growth expected to slow to 1.6%, as inflationary pressures from tariffs squeeze consumer spending.
• China’s growth revised down to 4.2%, due to declining U.S. trade and internal property market struggles.
• Europe remains caught in the crossfire, with German automakers particularly hit by U.S. tariff policies.

North America: Canada and Mexico in the Crossfire

It’s not just China feeling the squeeze—Canada and Mexico are collateral damage.

Canada: Economic Fallout from New U.S. Tariffs

• In November 2024, President Donald Trump announced 25% tariffs on Canadian imports, taking effect in January 2025.
• Given that 75% of Canadian exports go to the U.S., this move is expected to hit key industries like automotive, energy, and agriculture hard.
• Analysts predict a 2.5% contraction in Canada’s GDP by early 2026, with unemployment rising to 7.9% and inflation climbing to 7.2%.
• The Bank of Canada cut interest rates to 3% to soften the blow, but 150,000 jobs are at risk if tariffs persist.

Beyond trade, the battle for technological supremacy is heating up.

• Chinese AI company DeepSeek made waves in 2024 by developing a competitive AI model without access to U.S. advanced chips—a direct challenge to U.S. export controls.
• The U.S. is tightening semiconductor restrictions further, cutting off access to Nvidia’s latest AI chips, forcing China to invest heavily in domestic alternatives.
• China, in response, banned the export of key minerals required for high-performance chips, disrupting the global semiconductor supply chain.

The next phase of the trade war won’t just be about tariffs—it will be about who controls the future of technology.

What’s Next?

The trade war in 2025 is no longer just a dispute—it’s a global economic realignment.

• U.S. elections in November 2024 reshaped trade policy, with Trump’s return signaling a hardline stance on China and North America.
• China is accelerating trade agreements with the Global South, reducing reliance on Western economies.
• Europe is caught in a balancing act, wary of both U.S. tariffs and Chinese countermeasures.

Businesses and investors must brace for long-term volatility, shifting alliances, and a fundamentally altered global economy.

One thing is clear: the rules of global trade have changed—and no one is walking away unscathed.