5 June 2025, NIICE Commentary 11112
Mukund T
The US-China trade war can be understood through key theoretical perspectives in international political economy. Mercantilism also known as Nationalism, which emphasizes national economic security and protectionist policies, provides a useful lens to analyze US actions under the Trump administration. The administration’s imposition of tariffs and economic decoupling strategies align with mercantilist doctrines aimed at reducing dependence on China. Moreover, the trade war can be examined through the lens of hegemonic stability theory, which posits that a dominant global power maintains international economic order. The US, as a declining hegemon, sought to reassert its dominance by curbing China’s economic ascent. Furthermore, the liberal institutionalist perspective suggests that the trade war challenges the global free trade system by undermining multilateral institutions such as the World Trade Organization (WTO).
Economic Statecraft and Power Politics in the Trade War
The political economy of the US-China trade war can be analyzed through the convergence of economic policies, state power, and global market dynamics. From a realist perspective, the trade war demonstrates the use of economic tools to maintain geopolitical dominance. The United States, as the occupant of global economic power, sought to prevent China’s rise by imposing tariffs, restricting technology transfers, and encouraging supply chain decoupling. This aligns with mercantilist strategies, wherein states prioritizes national economic interests over free-market principles to secure strategic advantages. The Trump administration’s economic nationalism and protectionist policies were driven by domestic political considerations, appealing to voter concerns about job losses, manufacturing decline, and the erosion of US industrial competitiveness.
In contrast, China adopted a more state-driven response, leveraging its command economy to moderate the effects of US tariffs by subsidizing key industries and expanding trade partnerships with other nations, particularly through the Belt and Road Initiative (BRI) and BRICS. The trade war also exposed the vulnerabilities of globalization, highlighting how interdependence can be weaponized in economic conflicts. The political economy framework further explains the erosion of multilateral institutions like the World Trade Organisation (WTO), as both nations preferred bilateral negotiations and unilateral economic coercion over collective dispute resolution mechanisms. Furthermore, the fragmentation of global supply chains as a result of the trade war shows how states intervene in markets to achieve strategic objectives, challenging the neoliberal assumption that economic integration leads to stable political relations. Altogether, the US-China trade war depicts how economic policy is not merely about market efficiency but is deeply embedded in broader geopolitical power struggles and ideological contestations over the future of the global economic order.
Economic Motivations and Trade Deficits
One of the primary justifications for the trade war was the substantial US trade deficit with China. The Trump administration frequently cited the deficit, which stood at approximately $375 billion in 2017, as evidence of unfair trade practices. While trade deficits are not inherently detrimental, the administration argued that they reflected structural imbalances caused by China’s state-driven economic model, currency manipulation, and intellectual property theft. The United States imposed tariffs on over $360 billion worth of Chinese goods, while China retaliated with tariffs on $110 billion worth of US goods. The economic rationale behind these actions was to incentivize domestic production, reduce reliance on Chinese imports, and encourage fairer trade practices. However, empirical evidence suggests that tariffs primarily led to higher consumer prices, supply chain disruptions, and retaliatory measures that harmed US exporters.
Geopolitical Dimensions and Strategic Competition
Beyond economic concerns, the trade war was driven by broader geopolitical rivalries. The US perceived China’s technological advancements and industrial policies, particularly the “Made in China 2025” initiative, as a direct threat to its global technological dominance. The Trump administration took aggressive measures to curb China’s technological rise, including sanctions on Huawei and restrictions on semiconductor exports. These actions signaled a shift from traditional economic disputes to a more strategic confrontation over technological supremacy and national security. Furthermore, the trade war was embedded in the broader US strategy to contain China’s growing influence in the Indo-Pacific region. The US administration strengthened alliances with Japan, India, and Australia through the Quadrilateral Security Dialogue (Quad), highlighting the intersection of economic policy and geopolitical strategy. Thus, the trade war extended beyond tariffs and trade deficits, reflecting a deeper contestation over global power structures.
Impact on Global Supply Chains and Multilateralism
The trade war disrupted global supply chains and challenged the principles of multilateralism. Companies reliant on Chinese manufacturing faced increased costs and uncertainties, leading to a shift in supply chains towards Southeast Asian countries such as Vietnam and Thailand. The uncertainty created by tariffs and trade restrictions prompted firms to adopt a “China plus one” strategy, diversifying their production bases to mitigate risks. Additionally, the trade war weakened the credibility of multilateral institutions like the WTO, as the US opted for bilateral negotiations over institutional dispute resolution mechanisms. The Trump administration’s unilateral approach to trade conflicts undermined global economic governance and set a precedent for protectionist policies worldwide. The weakening of multilateralism raised concerns about the future of global trade norms and the potential fragmentation of the international economic order.
The trade war also had significant implications for BRICS (Brazil, Russia, India, China, and South Africa). As the US pursued protectionist policies, China sought to strengthen its economic ties with BRICS nations to counterbalance American economic pressure. The BRICS bloc played a crucial role in providing alternative trade partnerships, reducing China’s dependence on US markets, and fostering economic resilience. India, a key BRICS member, found itself in a strategic dilemma, balancing economic engagements with both the US and China while promoting its “Make in India” initiative. Russia, facing sanctions from the West, deepend economic and energy cooperation with China, further consolidating economic relations through BRICS. Additionally, Brazil and South Africa explored trade opportunities within BRICS to alleviate the impact of US-China tensions on global trade flows. The trade war reinforced BRICS’ role as a counterbalance to Western-dominated economic institutions, highlighting the shifting dynamics of global trade governance.
The Role of the Trump Administration
The Trump administration’s trade policies were characterized by economic nationalism and unilateralism. The “America First” agenda prioritized domestic economic interests over global trade integration, leading to a departure from traditional US trade policies. The administration’s negotiation tactics, including the use of tariffs as leverage, were rooted in the belief that economic coercion would force China to comply with US demands. The Phase One trade deal, signed in January 2020, required China to increase purchases of US agricultural and energy products, yet it failed to address underlying structural issues such as state subsidies and market access. The administration’s approach to trade policy reflected a broader skepticism towards globalization and multilateralism, aligning with populist sentiments that viewed China as an economic adversary. While the Trump administration’s policies reshaped US-China economic relations, they also led to unintended consequences, including economic uncertainty and strained diplomatic ties.
Mukund T is a Postgraduate student at CHRIST Deemed to be University, Bangalore, India.
