How A Three-Way Trade War With China, Mexico And Canada Could Weaken The US

Wed Feb 05 17:39:00 UTC 2025: ## US-China Trade War Escalates with Mutual Tariff Impositions

**Washington/Beijing** – A trade dispute between the United States and China has officially escalated, with both nations imposing tariffs on each other’s goods, potentially sparking a prolonged trade war. The US initiated the conflict by implementing a 10% tariff on all Chinese imports. China retaliated with tariffs ranging from 10% to 15% on various US products, including coal, liquefied natural gas, crude oil, agricultural machinery, and large-displacement vehicles.

Further escalating tensions, China added American companies Illumina and PVH Group (owner of Calvin Klein and Tommy Hilfiger) to its “unreliable entities” list, restricting their operations within the country. This action cites violations of normal market trading principles.

Experts warn of potentially severe consequences if a resolution isn’t reached quickly. Clark Packard of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies cautioned that the conflict could intensify rapidly, potentially leading to significant economic repercussions.

The US tariffs are expected to increase prices for American consumers on a wide range of goods, including electronics, toys, and apparel. Increased import costs for raw materials will also impact American businesses. Job losses in both countries are a significant concern.

Morgan Stanley economists predict further US tariffs on China later this year, prompting further Chinese retaliation. A more alarming scenario, according to Citibank economists, involves a three-way trade war encompassing the US, China, Mexico, and Canada. This could lead to significant economic contraction in the US, with projected GDP shrinkage of 0.8% this year and -1.1% next year. While China’s economy would experience a lesser impact, Mexico and Canada face substantially greater economic hardship than the US. The current situation remains volatile, with the possibility of negotiations to de-escalate the conflict still on the table.

Read More