He then imposed tariffs on key trade partners, especially China. By then, the cost of offshoring had become clear.
With US corporate assistance, China had gained capital and technology expertise to become the“ world’ s factory.” Low-tariff access to the US market gave Beijing a $ 300 billion surplus over America in 2024, and it emerged as the world’ s top exporter and creditor.
President Biden struck a less confrontational tone upon assuming office in January 2021, yet he similarly raised tariffs on China. Like China, the EU and Japan had established large trade surpluses with the US, an issue he sought to address, but geopolitical unity with the US on the global stage tempered criticism. Despite lowering tariffs on Europe, Biden nonetheless passed the Inflation Reduction Act and CHIPS and Science Act, both criticized by the EU as protectionist.
Trump’ s second-term focus has again hit allies, yet the attention remains squarely on China, with individual tariffs on other countries being paused on April 9, while tariffs on Beijing have increased.
Aside from direct exports, Washington also seeks to target China’ s role in global trade. Biden’ s push to“ nearshore” manufacturing to countries like Mexico exposed the limits of decoupling, as Chinese companies quickly established themselves in new Mexican industrial parks.
Many imports shipped to the US from other countries also contain Chinese components, meaning Trump’ s 10 percent“ baseline” tariff hike on all imports is meant to counteract other countries serving as conduits for Chinese goods.
In Project 2025, Peter Navarro emphasized the role of non-tariff barriers, like strict safety standards, customs delays and local content requirements, in obstructing US exports. The US uses these, too, and in early February 2025, Trump cited fentanyl smuggling as justification for raising tariffs on China, Mexico and Canada.
Even if a more conventional president follows, Trump’ s tariff hikes and resulting supply chain rerouting may prove difficult to undo. Critics question whether this transition can be fast, affordable or effective, but the Covid-19 pandemic proved supply chains can reorient under pressure relatively quickly, just as China showed its agility by setting up operations in Mexico during the 2020s.
Internal Risks
A tariff war will nonetheless raise prices for consumers and businesses, ending the era of cheap global goods that the US economy has depended on for decades.
Countries maintained friendly ties to keep consumer market access and reinvested US dollars into American stocks, bonds and real estate. Uncertainty over Trump’ s policies saw a fake tweet about tariffs on April 7 trigger multi-trillion-dollar swings. Prolonged stock volatility or declines would reduce pensions, household wealth and corporate valuations.
Some argue that if the stock markets crash, money could flow into and lower the price of US treasuries, reducing their prices and allowing the government to refinance long-term bonds with cheaper debt.
However, many traditional US debt
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