A New Phase in the Trade War

The defining keyword of China's foreign policy in 2025 was 'tariff retaliation.' As Donald Trump's second-term administration launched a full-scale attempt to reshape the global trade order using tariffs as a weapon, the conflict between the world's two largest economies entered a new dimension.

The leading actors on the diplomatic stage have changed. US-China relations, once centered on political and military issues, have now shifted to a framework where trade negotiators and economic officials take center stage. At the negotiation table, trade specialists have replaced diplomats, and tariff discussions have supplanted security talks.

145% vs 125%: A Vicious Cycle of Tariff Retaliation

On April 2, the Trump administration imposed additional tariffs on major trading partners including China, marking the beginning of an all-out trade war. Beijing immediately responded with retaliatory tariffs, and tariff rates on both sides spiraled out of control.

Ultimately, the situation reached extremes with the US imposing 145% tariffs on Chinese products and China imposing 125% tariffs on American goods. This signifies that what began as a simple trade dispute has escalated into an economic war shaking the entire global supply chain.

Five Rounds of Negotiations: Consecutive Temporary Patches

To ease mounting tensions, working-level officials from both countries sat down for negotiations five times throughout 2025:

• May 10-11: Geneva, Switzerland
• June 9-10: London, United Kingdom
• July 28-29: Stockholm, Sweden
• September 14-15: Madrid, Spain
• October 25-26: Kuala Lumpur, Malaysia

After the fifth round, both sides announced they had reached a temporary agreement framework, but core issues remained unresolved and postponed. They merely froze tariff rates for two 90-day periods, failing to find fundamental solutions.

Summit Provides Momentary Relief

On October 30, President Trump and President Xi Jinping met in person in Busan, South Korea. The agreement reached at this summit was a 'postponement' rather than a 'resolution.'

The US reduced the additional 20% tariff—imposed for inadequate crackdown on illegal fentanyl trafficking—to 10%, and agreed to suspend the mutual 24% tariff for one year starting November 10. Critical issues such as semiconductor technology restrictions, rare earth controls, and shipping sector sanctions remain unresolved.

China's Strategic Response: Multipolarity and the Global South

In response to US economic pressure, China diversified its diplomatic strategy. Beijing pivoted toward promoting a 'multipolar world order' and strengthening cooperation with the 'Global South'—a coalition of developing nations.

The Shanghai Cooperation Organization (SCO) summit held in Tianjin, China, and the Beijing military parade commemorating the 80th anniversary of World War II's end served as platforms to convey this message. These moves are interpreted as attempts to consolidate relations with Russia while building an alternative axis to the US-centric order.

The Japan Factor: New Tensions Over Taiwan Intervention Hints

Toward year's end, diplomatic conflict with Japan also emerged. When newly appointed Japanese Prime Minister Sanae Takaichi hinted at the possibility of military intervention regarding Taiwan, new tensions arose in China-Japan relations.

Japan's indication of willingness to intervene in Taiwan—an issue China defines as a core interest—demonstrates that the East Asian geopolitical landscape is becoming increasingly complex as it intertwines with US-China tensions.

Future Outlook [AI Analysis]

US-China relations in 2025 exemplified 'managed conflict.' The crisis management mode—avoiding full-scale confrontation while not pursuing fundamental resolution—is likely to continue.

Several points warrant attention:

First, the tariff war will become protracted. Both sides are enduring economic damage without retreating. The pattern of 90-day suspensions and renegotiations is likely to repeat throughout 2026.

Second, China's 'de-Americanization' of supply chains will accelerate. Moves to strengthen control over critical resources like rare earths and reduce dependence on the US through economic solidarity with developing nations are expected to intensify.

Third, Taiwan could become a new flashpoint. Japan's hints at possible intervention may not be mere diplomatic rhetoric. If tensions in the Taiwan Strait escalate while US pressure on China continues, the risk of the trade war transforming into a security crisis cannot be ruled out.

From a global economic perspective, supply chain reorganization is inevitable. Companies are being forced to choose between the 'US market' and the 'Chinese market,' accelerating the 'bloc-ization' of the world economy. Middle powers like South Korea are expected to face increasingly difficult diplomatic balancing acts under pressure to choose sides.