# Trade war Spurs decoupling between China and the United States

- Link: https://www.thailand-business-news.com/china/210142-trade-war-spurs-decoupling-between-china-and-the-united-states
- Published: 2025-04-21T08:59:00+07:00
- Author: Olivier Languepin

Donald Trump’s tariff escalation is setting the stage for a significant upheaval
in the global economy, leading to an inevitable rift between the world’s two foremost
industrial, technological, and financial powers.

The ongoing trade war between the United States and China has significantly accelerated
the decoupling of their economies, driven by escalating tariffs and retaliatory 
measures. Recent developments show the U.S. imposing cumulative tariffs of up to
145% on Chinese goods, with effective rates reaching 156%, while China faces tariffs
as high as 245% on its imports to the U.S. due to its retaliatory actions. These
measures have pushed U.S.-China trade toward an expected decline of over 80%, described
by the World Trade Organization as “tantamount to a decoupling.”

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The divorce of Donald Trump’s America from China is painful. The decision to ban
Nvidia, a leader in artificial intelligence chips, from selling even basic microprocessors
to Beijing, led to significant tremors in the financial markets on Wednesday, April
16. Nvidia’s stock dropped by 6.9%, pulling down US technology stocks and causing
the Nasdaq index to fall by 3.07%. This move represents a costly phase in the US-
China decoupling initiated by Donald Trump. In response, Chinese President Xi Jinping
is resisting, aiming to increase the economic burden on the United States.

Economic consequences are already evident. Global trade growth projections have 
shifted from 2.7% to a 0.2% contraction for 2025, with U.S. and Chinese firms like
Nvidia, Boeing, and soybean producers facing significant revenue losses. U.S. markets
have reacted sharply, with the Dow dropping significantly and Asian shares declining
as tariffs took effect. China, however, reported a 5.4% GDP growth in Q1 2025, suggesting
resilience, though analysts warn of pressure from reduced foreign trade

Donald Trump has already been compelled to suspend customs duties on electronic 
devices produced in China, as these tariffs threatened to harm Apple, which manufactures
most of its iPhones there, along with other American electronics. However, he remains
firm on maintaining tariffs on other Chinese imports, which have been taxed at 145%
since April 10. In response, Beijing imposed its own customs duties of 125% on April
11.

China has implemented various strategies, such as prohibiting its airlines from 
accepting Boeing aircraft deliveries. In response, Donald Trump angrily accused 
China of breaching its contracts. Additionally, Beijing has quietly established 
a licensing system for exporting certain rare earths, effectively halting the supply
of these crucial metals used in magnets for smartphones, medical imaging, electric
vehicles, and missiles.

## Significant unpredictability

In Chinese ports, the shipment of many products to the United States has been suspended
in recent days, either at the initiative of Chinese factories or at the request 
of American customers. All hope that the tariff war will be brief and are betting
on a staggered shipment. Otherwise, the rupture will be felt concretely, in a few
weeks’ time, in American toy or appliance stores, accelerating a decoupling that
is so often mentioned, but which was in fact only happening at a slow pace.

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Despite a confrontational discourse between the United States and China under Barack
Obama, a first trade war started by Donald Trump and continued by Joe Biden – officially
for security reasons – the disintegration of the world’s two largest economies had
not yet taken place. But the tariffs imposed by Trump and the retaliation decided
by Xi Jiping have created major uncertainty, which could force a rupture. This has
so far proved to be if not impossible, at least costly. However, the conditions 
for what would be a major tectonic shift for the world – the irremediable distancing
of the world’s two leading economic powers – are no longer far from being met.

On Wednesday, April 16, the World Trade Organization (WTO) projected an unprecedented
decline in international trade for 2025, estimating a drop between 0.2% and 1.5%.
This forecast has intensified concerns, particularly as Chinese exports to the United
States are anticipated to plummet by 77%, according to the WTO. Additionally, the
organization predicts a historic contraction in global trade this year, attributing
it to the impact of the “Trump storm.”

In the figures, the separation of the two economies is apparently already at work.
The United States’ trade deficit with China, which had reached a record $418 billion
in 2018, has narrowed to $295 billion (€260 billion) in 2024. This decline is not
explained by a jump in US exports, which are derisory ($143 billion in 2024), but
by the decline in Chinese imports, which fell from $538 billion to $438 billion.
Part of this reduction is certainly an optical illusion: Mexico is clearly increasingly
serving as a gateway for Chinese products to North American territory. Thus, over
the same period, the bilateral deficit with Mexico has soared by $95 billion, to
reach $172 billion.

## The United States needs China

Above all, the separation is sometimes painful. China has distinguished itself in
the industrial manufacture of products and components that the Americans do not 
manufacture, with competitive advantages that are not only wage-based; the United
States needs it. The Apple boss explained his motivations in a video in 2024. _“
The conventional wisdom is that companies are moving to China because of low labor
costs_,_ but the truth is that China has not been a low-labor country for many years,”_
said Tim Cook, whose subcontractor Foxconn moved iPhone production from Shenzhen
on the industrialized coast to the poorer rural region of Henan from 2010 to reduce
the impact of rising wages Chinese.

For years, Cook has been trying to move some of his production to India or the United
States, but the process is an almost impossible mission. According to market research
firm TechInsights, quoted by the [_Financial Times_](https://www.ft.com/content/5c4b2bc9-f0ac-46f3-a93b-cfa6273428f9),
the final assembly of an iPhone 16 includes 387 individual parts, including chips,
circuit boards, batteries, cables, lenses, displays, and metal and plastic parts.
Of Apple’s 187 essential suppliers, 169 produce in China or Taiwan, the _Financial
Times continues_. However, Bloomberg claims that Apple now manages to produce 20%
of its iPhones in India.

The iPhone and electronic equipment are the most threatened by this scenario. The
United States imports $127 billion worth of Chinese electronic equipment per year,
followed by $85 billion in machinery, boilers and nuclear equipment, $32 billion
for toys and sporting goods, and $21 billion for plastics.

## Monetary Connection

In addition to the battle over import-export, there is the fear that China will 
seek to reduce the footprint of American brands established on its territory. In
the coffee market, Starbucks is facing the rapid rise of local players such as Luckin,
who are increasingly established in the daily lives of the Chinese. Exposure to 
China is similar for Nike, which generates 15% of its turnover from Chinese consumers(
compared to 43% for the North American market), but sees local brands such as Anta
or Li Ning gain very much in respectability. Starbucks, Nike and Caterpillar have
lost about 30% of their value on the stock market since the highs at the beginning
of the year.

The Sino-American link is also financial, as some new Chinese giants, particularly
in technology, have sought financing on Wall Street, starting with the e-commerce
leader Alibaba. U.S. Treasury Secretary Scott Bessent, when asked about the potential
delisting of Chinese companies, said all options were _“on the table.”_ This threat
has been brandished many times, but has never been carried out. It would create 
a major liquidity problem for Chinese companies.

In March, 286 of them were listed in the United States, for a total market capitalization
of $1,100 billion. A year earlier, there were only 265, according to an official
count by the federal government. Above all, since the beginning of 2024, 48 Chinese
companies have entered the US stock exchanges, raising $2.1 billion. _“The United
States has two major assets: delisting and banning investment in the United States,”_
writes the analysis firm Jefferies, quoted by Bloomberg. Beijing sees the presence
of its companies on Wall Street as a major loophole, but one to which there is no
short-term solution.

## Brazilian rather than American soybeans

The breakage is also accelerating in the fields. Obsessed with the need to feed 
its huge population, China is seeking to reduce its purchases of American agricultural
products and to sanction agricultural regions, bastions of Trumpism. From the 2010s,
Brazil overtook the United States as China’s leading supplier of soybeans and then
overtook them on corn in 2023. In return, American agriculture is becoming less 
dependent on China: while China has long remained the largest export market for 
American farmers, it has fallen behind Mexico and Canada in 2024. Trump’s tariffs
are accelerating the movement: China has placed massive orders for Brazilian soybeans
in recent weeks and sent a deputy minister of agriculture to Brasilia on Thursday
17 April to try to fill the gap, with US soybeans losing all appeal with tariffs
of 125%.

Decoupling. The word is now in everyone’s head and, as a goal, it is considered 
quite_ “possible”_ by Jamie Dimon, head of the largest American bank, J.P. Morgan,
in an interview with the [_Financial Times_](https://www.ft.com/content/260dbc93-9fc2-4434-ac24-4dfc1cc926a6).
But the latter, like the rest of the American employers, would prefer a prior alliance
with the Europeans. _“America first is good, but America alone,”__ _Dimon said. 
This is not the path followed since his re-election by Donald Trump, who has been
unable for the moment to engage in reasonable negotiations with Xi Jinping.

While a complete decoupling is deemed “almost impossible” by some analysts, the 
trajectory points to a sharp deterioration of economic ties, with global ramifications
for markets, supply chains, and geopolitical stability. The question remains whether
negotiations can halt this spiral or if both nations will continue down a path of
economic separation.