US-China trade war heats up again: Who will feel the impact?

With a fresh 10% tariff on all Chinese goods, U.S. President Donald Trump has reignited trade tensions between the world’s two largest economies. The ripple effects will be widespread, though not uniform. Some industries may find alternative suppliers with relative ease, while others will struggle to adapt, according to The Economist.

A closer look at global trade patterns highlights which sectors will be most affected. For items like cotton cardigans, diversification is relatively simple—China accounts for just 21% of global exports, and the U.S. makes up 24% of global imports. This means both countries can likely turn to other partners, albeit at the cost of potential price hikes or quality changes.

However, certain goods are far more entrenched in U.S.-China trade. Christmas decorations, for example, are overwhelmingly sourced from China, which supplies nearly 80% of global exports, while the U.S. accounts for about half of global imports. For such products, finding alternative suppliers is far more challenging.

Yet, trade is not static. Given time, production can shift to other countries. The key question is: which goods are easiest to relocate, and which will be the hardest to replace? Data from the Atlas of Economic Complexity offers insight. Products like tin ore or raw cotton are relatively simple to produce, while advanced electronics, chemicals, and medical instruments require sophisticated manufacturing capabilities.

Among the top imports from China to the U.S., most are highly complex. Laptops and smartphones stand out as particularly difficult to manufacture elsewhere due to intricate supply chains and specialized expertise. The most vulnerable products fall into a category where production is both complex and deeply embedded in U.S.-China trade. Adjusting supply chains for these items will take significant time and investment, ensuring that at least in the short term, trade between the two countries will persist despite tariffs.

Ultimately, the reason the U.S. imports over $400 billion in Chinese goods annually is simple—China provides what American consumers want at competitive prices. Imposing tariffs disrupts this dynamic, leading to reduced trade and higher costs. History offers a clear precedent: after Trump’s 2018 tariffs on washing machines, American consumers faced a 12% price hike. For many goods, similar inflationary pressures appear inevitable.

By Vugar Khalilov