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Trade tensions and tariffs wars
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China-US trade relations dominated the world in 2025, starting in a dramatic escalation of hostilities before settling into an uneasy, temporary truce.
The drama started when the Trump administration, crying foul in world trade balance and declaring “America First,” slapped high tariffs on imports on all its trading partners and subjugated exports to what it considered its national interests.
The protectionism peaked in the spring, with China, the world’s second-largest economy, the target of the toughest US policies. At one point, Washington tariffs on Chinese imports soared to 145 percent and exports of chips and other advanced technologies were banned.
China wasn’t cowed; it simply retaliated with its own tariffs on a vast array of US goods, including farm products like soybeans, and imposed restrictions on exports of raw materials the US needs, like rare-earth minerals vital in industrial production.
A pivotal meeting in South Korea in late October between Chinese President Xi Jinping and Trump yielded a fragile, yearlong trade truce. The US agreed to roll back some of its most punitive tariffs, while China committed to purchasing significant volumes of US farm products, including a multiyear promise for at least 25 million tons of soybeans a year, and relaxed export controls on rare-earth minerals and magnets.
The new year begins with the temporary truce setting the stage for a period of “managed rivalry,” with the focus of competition expected to shift to technology. Both nations remain keen to lead the world in AI, data centers, advanced chip production and biotech innovation. Non-tariff tools such as export controls and industrial subsidies are expected from both sides as they seek to improve their advantage and decouple dependence on one another.
What emerged this year is a common consensus that the US underestimated China’s strength, vitality and resolve. Beijing showed it can’t be bullied. Going forward, relations in 2026 will rely heavily on how Washington recalibrates its policies to the new reality.
On December 18, China launched islandwide special customs operations in the Hainan Free Trade Port, the world’s largest FTP by area, allowing freer entry of overseas goods, expanding zero-tariff coverage and introducing more business-friendly measures. Under the new arrangements, the tropical island, covering more than 30,000 square kilometers and about a 1.5-hour flight from Hong Kong, has been designated a special customs supervision zone.
The move is widely seen as a landmark in China’s efforts to promote free trade and expand high-standard opening-up amid rising protectionism worldwide.
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