The US-China Trade War Escalates

The US trade war with China escalated this week, with the US setting a tariff rate of 125% on goods imported from China, effective April 9. China retaliated, announcing 84% tariffs on goods it imports from the US.

Why China is important: China is a leading trading partner of the US, and 14% of imported goods (measured by value) are sourced from China. US total goods trade with China stood at an estimated $582 billion in 2024, with a trade deficit of $295 billion, which is 5.8% greater than 2023.

US goods exports to China in 2024 totaled $144 billion, down 2.9% from 2023. US goods imports from China in 2024 totaled $439 billion, up 2.8% from 2023. It is notable that US trade with China has declined over the past six years, down 12% since 2018.

The TCB take: Consumer prices will escalate. With bilateral tariff rates between 80-125%, it is certain costs will be passed onto consumers. The leading goods imported from China include electrical items (e.g. smartphones and televisions), as well as machinery and appliances, toys, furniture, and plastics, including components of automobiles. For four of the top five product types imported from China, more than a quarter of those products imported into the US are from China (see table below).

US farmers to be hit hard: A whopping 47% of US soybeans and related agriculture products exported by the US went to China. This is a downward trend, as China has increasingly turned to Brazil and other countries in recent years.

These new tariffs could drastically reduce China’s dependence on US soybeans, and cripple that agricultural sector, which is primarily in Illinois, Iowa, Minnesota, and Indiana. The Administration and lawmakers are reportedly discussing farm aid in light of these retaliatory tariffs.

US-China Trade Hinges on Electronics, Soybeans