US-China Trade War: What Are the Implications for the Global Economy?

A Trade War Intensifying

Since 2018, the trade war between the United States and China has continuously escalated. In April 2025, President Donald Trump raised tariffs on Chinese products to 104%, prompting China to retaliate by increasing tariffs on US products to 125%.

At the same time, the United States temporarily suspended tariff increases for certain countries for 90 days, while continuing investigations into sensitive sectors such as semiconductors and pharmaceuticals.

Global Economic Repercussions

The World Trade Organization forecasts an 80% reduction in trade between the United States and China, leading to major disruptions in global supply chains.

The OECD has revised its global growth forecast downwards, expecting global GDP growth of 3.1% in 2025, compared to 3.4% previously.

Panama Canal Handed Over to the United States

In a major development, Panama officially handed over control of the Panama Canal to the United States in April 2025, following rising geopolitical pressure and national security concerns. This decision was facilitated by a bilateral agreement between the two nations, allowing the US to regain full control of this strategic waterway.

Tensions surrounding this issue had led to a series of negotiations and diplomatic incidents, with China being accused of attempting to extend its influence over this crucial global trade route.

Meanwhile, Mexico has begun constructing a new maritime passage through the country, allowing Chinese vessels to bypass the Panama Canal and access both the Atlantic and Pacific Oceans, thereby reducing their dependence on US control of the canal.

Impacts on Strategic Sectors

The electric vehicle (EV) industry in the United States is particularly vulnerable due to its reliance on critical materials supplied by China. Chinese restrictions on minerals such as rare earth elements and graphite further complicate the American energy transition.

Moreover, China has accused the United States of conducting advanced cyberattacks, intensifying tensions beyond the commercial realm.

Future Outlook

Experts estimate that this trade war could cost 0.5% of global GDP by 2030, with losses of 1.3% for both the United States and China.

While negotiations seem deadlocked, escalating tensions suggest that this conflict could reshape global economic relations for years to come.