What is the Trump Trade Wars 

What is a Trade War?

A trade war occurs when countries impose tariffs or other trade barriers on each other in retaliation, often escalating tensions in a tit-for-tat fashion. Unlike traditional warfare, trade wars are economic battles, fought with taxes on imports and exports, rather than military weapons. The goal is usually to protect domestic industries, correct trade imbalances, or exert political pressure. However, trade wars can also disrupt global supply chains, increase consumer prices, and slow down economic growth. 

When two or more countries begin imposing tariffs on each other’s goods, it often leads to higher costs for businesses and consumers. This reduction in trade efficiency can strain international relationships and shake global markets—including stocks, currencies, commodities, and ETFs. Investors watch trade war developments closely, as they tend to trigger volatility and influence both short-term sentiment and long-term economic outlooks. 

Is Trump Creating a Global Trade War

The question on many people’s minds has been: “Is Trump creating a world trade war?”, but the answer is complex. In early 2025, US President Donald Trump expanded the program of import tariffs he had imposed during his first term in office. For a start, he set a blanket 10% duty on all imports, which would apply to more than $2.8 trillion worth of goods from all over the world. At the beginning of February, Trump announced his intentions of slapping his geographical neighbours, Mexico and Canada, with additional tariffs of 25%. Near the middle of that month, he mentioned the need to institute “fair and reciprocal” duties to get the US up to speed with pre-existing taxes imposed by foreign nations. For example, until then, European cars were only charged a tax of 2.5% when entering the US, while the EU charged as much as 10% to American vehicles arriving on its shores. 

When it came to China, Trump singled them out for special attention, doubling their import tariff to 20% in the first week of March. Rather than bowing to the pressure, the Chinese government decided to give Trump a dose of his own medicine, hitting US energy and machinery shipments with taxes of 10%-15%. As a result of this tit-for-tat escalation, by April, President Trump had raised the level of tariffs on Chinese imports to 145%. China, for its part, had brought their own duties up to 125%. “This is a classic trade war”, wrote the Atlantic, because each of the two powers was single-mindedly pursuing “the goal of forcing the other country to back down and, at least in theory, agree to certain concessions”. These words make for a fine “trade war” definition and, indeed, it seemed that the motivating force behind the escalation was each nation’s desire to assume the commanding position.  

US Treasury Secretary Scott Bessent explained the American point of view quite clearly when he said that “We export one-fifth to them of what they export to us, so that it is a losing hand for them”. However, China might find new markets for her products in Southeast Asia. Plus, the unprecedented scale of Trump’s tariffs also threatened to heat up domestic inflation and hold back the US economy. One reason for this was that making the transition to local production in the United States would, in many cases, take years to accomplish. In the meantime, US consumers would be exposed to elevated prices. This is a possibility the Trump administration has acknowledged. They contend, however, that this temporary sacrifice is justified by the long-term benefits of reshoring America’s supply chain in friendlier waters, and also by the jobs that will be created through building up local industries.  

Which of the two powers – China or the USA – will be thrown into a weaker position by the Trump trade wars? What will be the likely results of these tit-for-tats on the world stage? 

Effects of the Trade Wars on the Market

1. Bloc Formation

In the third week of April 2025, Chinese President Xi Jinping made visits to three nations in Southeast Asia with the aim of solidifying economic ties. Rather than attempting to strike a deal with the United States, China was following a course of shoring up allies and bolstering her independence from US trade relations. More than that, China’s Commerce Ministry openly accused the United States of “[abusing] tariffs on all trading partners under the banner of so-called ‘equivalence’” and threatened to “take countermeasures in a resolute and reciprocal manner” on any nation that would join together with the US in a trade bloc against China.  

This left many countries in a quandary about where to place their loyalties – with the US or with China – especially if they were involved in significant trade with both of the two. Near the end of April, ministers from Thailand, Indonesia, and Malaysia traveled to the USA to discuss these matters with Trump. Indonesia had already given signs of prioritizing trade with the US, having raised import volumes of American food products and commodities. Japan, too, had said they may bring in more American soybeans and rice. On the other hand, when it comes to “countries [that] have high reliance on China in terms of investment, industrial infrastructure, technology know-how and consumption”, says Plenum’s Bo Zhengyuan, “I don’t think they’ll be buying into US demands”. 

2. Pre-Existing Fault lines

Where will the boundaries of the new trade blocs fall? During the Second World War, countries like Germany and Italy banded together because of ideological similarities. This time around, the dominant forces in determining loyalties may be economic and, in many cases, President Trump has nothing to do with them. For instance, Australia and India made an agreement in mid-2022 to resist China’s monopoly of critical mineral supply chains. Japan has bound itself business-wise with India on the same issue. South Korean tech firms have struck deals with Australian mining companies surrounding the commercialization of Australia’s bounteous natural mineral deposits. 

A broader alliance was formed between the USA, India, Australia, and Japan in March 2022 when the Quad Critical Minerals Partnership was signed. This pact aimed to remedy “the national security threat posed by the People’s Republic of China’s control over nearly two-thirds of the global supply of critical minerals”. Australia, for one, was very anxious to curtail Chinese ambitions of dominating the market in critical mineral production. Somebody else who wanted to keep China in check on this score was Trump’s predecessor, Joe Biden, who grouped together with 11 other nations to mutually guarantee supplies of critical minerals. Biden also offered incentives to draw the American private sector into boosting mineral production at home.

3. Rare Earth Minerals

As of April 2025, President Xi Jinping had set licensing restrictions on seven of China’s rare earth minerals, namely samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. While not constituting an outright ban, these restrictions did “[give] China a stranglehold over inputs into supply chains that are crucial to American primacy, from semiconductors to aircraft”, in the words of Chatham House’s William Matthews. Because some of the restricted minerals are used in the production of advanced fighter jets, which both the US and China are actively developing, the resulting tensions could potentially take on a military flavor. 

Aside from military applications, the rare minerals are vital components in many tech products including electric vehicles, which are at the center of both Chinese and American economic hopes. In her anxiousness to secure supplies, the US has attempted to engage Ukraine in a mineral deal, and has also made its designs known on mineral-rich Greenland. Thus, the rush to assert control over this crucial market has already shaken up the geopolitical dynamics of the world in pronounced ways.

Possible Results of the Trade Wars

Looking at the bold political and economic moves made by world powers over the issue of rare earths, we see a pointed struggle, like a wrestling match, to gain the upper hand. Old loyalties may be broken and new ones formed as each nation struggles to promote its own interests. While some of the new national relationships may be built on ideological affinities, the chief binding factor appears to be the mutual desire to ensure economic and military security.  

Consequently, the patterns of global re-affiliation have been determined by national instincts to, either curb Chinese dominance on the one hand, or take advantage of it on the other. Irrespective of nations’ deeper motivations, it does appear that the map of global loyalties – both economic and military – is currently being redrawn while it will shake global markets— such as currencies, commodities, and ETFs.