No Thaw in Sight: U.S.-China Trade War Likely to Persist beyond 2025

As April 1 approaches—the deadline set by President Trump’s America First Trade Policy for a sweeping review of China’s various trade and economic practices— hope for a stable U.S.-China trade parley is fading. The primary differences between the two economies remain vast, and unless one side makes significant structural compromises, any negotiation focused merely on reducing the trade deficit or boosting U.S. jobs is likely to fail, much like it did during Trump’s first term. 

While some of Trump’s former senior advisors, such as Michael Pillsbury, have suggested that, by leveraging the power of tariffs, the president and his team are aiming for a bigger and better trade deal with China—one that even incorporates non-trade issues such as nuclear security—Beijing is unlikely to play along. The Trump administration’s new trade agenda extends far beyond holding China up for its Phase I commitments, resurrecting old grievances over alleged IP theft, currency manipulation, and unfair trade practices while further securitizing U.S. export controls and tightening outbound investment screening. These issues cannot be resolved through a single negotiation or trade deal, ensuring that U.S.-China economic tensions will persist well beyond 2025.  

Recent developments also suggest that China has no intention of engaging on Trump’s terms. On February 1, the administration announced a 10% universal tariff alongside the suspension—later temporarily rolled back—of the de minimis exemption, linking the move to the ongoing fentanyl crisis and placing blame on Beijing. China’s response was swift and unequivocal, publicly rebuking the accusation and refusing to engage in any negotiations framed by U.S. pressure tactics. Unlike Canada and Mexico, which both compromised after Trump raised tariffs on them to 25% in exchange for a temporary suspension, Beijing took a harder stance. A scheduled phone call between President Xi and Trump was called off following China’s retaliatory measures, and China’s Minister of Commerce sent a formal letter congratulating Howard Lutnick on his confirmation as Commerce Secretary without even mentioning potential trade negotiations at all. Instead of signaling a willingness to negotiate, China protested the 10% tariffs outright and insisted on “equal dialogue,” making no overtures toward a reciprocal compromise. Same as Treasury Secretary Bessent’s introductory call with his Chinese counterpart, this pattern continued, reinforcing the notion that China is not willing to participate in another round of trade talks under Trump’s terms unless the exchanges and terms are genuinely seemed as “fair” and “reciprocal”.

Even for President Trump, securing a trade deal with China in 2025 is not only unlikely but also impractical given competing priorities. His administration is actively pursuing a trade deal with India by the end of this year, and time and effort constraints will likely push his team to prioritize New Delhi over Beijing. Unlike China, India offers a $500 billion worth low-risk, high-reward deal opportunity that allows Trump to claim a major trade victory without addressing deep-rooted differences. A trade pact with India also aligns with Washington’s broader strategy of increasing energy export, diversifying supply chains and reducing reliance on China, which has been a longstanding economic goal since the beginning of the strategic competition. With more tariffs, sanctions, and Chinese countermeasures expected to escalate in April, the White House will have little bandwidth to pursue an ambitious, high-risk deal with Beijing. Instead, the Trump team will likely focus on solidifying economic gains elsewhere while letting the China trade war continue unresolved.

Hopes that a trade deal with India or alternative supply chain arrangements can meaningfully cushion the U.S. economy from the impact of prolonged tensions with China may, however, be overly optimistic. Inflationary pressures persist, and the U.S. is facing mounting fiscal challenges, particularly with the approaching March congressional appropriation deadline, which has no clear resolution in sight. A government shutdown remains a looming risk, and Trump’s plan to use tariff revenue, alongside the controversial Department of Government Efficiency (DOGE) layoffs, to reduce the budget deficit presents both political and economic uncertainty. More importantly, China’s financial countermeasures could significantly complicate Trump’s fiscal ambitions. If Beijing resumes selling U.S. Treasuries as it has done in recent years, borrowing costs for Washington could rise at a time when market stability is crucial. Additionally, prolonged economic tensions with China could further erode confidence in the U.S. dollar as trade turbulence will constantly shake the dollar up-and-down. Moreover, with China and Europe likely going to be hit more by Trump’s reciprocal tariffs, these two large economies are likely going to put more effort into stabilizing their currencies against the U.S. dollar. The impact on global capital flows may not be immediate, but the trend toward de-dollarization—however incremental—poses a long-term challenge that Washington cannot ignore, especially the capital market and the finance industry is the so far the only force that sustains U.S. economic growth.  

Given these economic risks, it is worth considering whether Trump might offer Beijing some form of tactical, sector-specific compromise rather than pursuing a broad trade deal. That said, a traditional “give-and-take” approach is unlikely to yield results, as the products China needs most—such as high-end semiconductors and technologies—are restricted due to U.S. national security concerns, leaving little room for a meaningful trade bargain. Beyond high-tech sectors, the U.S. has few economic incentives it could realistically offer Beijing in exchange for trade concessions. 

If Trump does seek an alternative bargaining strategy, it may come in the form of geopolitical, rather than economic, concessions. The U.S. could, for instance, consider offering a potential Fourth Communiqué to stabilize the issue of Taiwan or adopting a less active and vocal stance in the China-Philippines territorial dispute to cool tensions. These are areas where Beijing may seek a breakthrough, and such moves would align with Trump’s transactional approach to foreign policy, as exemplified by Vice President J.D. Vance’s remarks at the Munich Security Conference regarding U.S. new position on the war in Ukraine. However, the plausibility of these moves remains highly uncertain. The Trump administration is still fundamentally committed to strategic competition with China, and offering Beijing a favorable geopolitical environment in its periphery would likely face strong resistance from a hardline Congress. Such moves would also undermine Washington’s long-term leverage in the broader U.S.-China rivalry, making them an unlikely path forward.  

Rather than offering major geopolitical concessions, the U.S. is more likely to make tactical adjustments in areas where the economic damage is too great to sustain, while simultaneously seeking greater support from allies and partners who are strongly dependent on U.S. security protection, such as Japan and Taiwan. One plausible strategy is to further integrate Taiwan into the U.S. economic cycle, encouraging Taiwanese investment in critical U.S. industries such as semiconductors. The rumored TSMC investment in Intel aligns with this broader industrial policy push, as does the administration’s quiet yet deliberate effort to strengthen economic ties with Taipei. While most media attention on the recent State Department update to U.S.-Taiwan relations focused on the removal of the explicit statement that the U.S. does not support Taiwan independence, the more significant aspect is how Washington explicitly outlined its intention to deepen Taiwan’s integration with the U.S. economy. From Washington’s perspective, this would serve a dual purpose: reinforcing supply chain security while leveraging Taiwan’s fundamental security need to seek for more economic and tech integration during the trade war with the Mainland. The U.S. is pursuing similar economic realignments with other allies as well, as seen in Japan’s Nippon Steel’s non-controlling investment in U.S. Steel, which mirrors Trump’s broader push for European allies to contribute more to NATO. These moves reflect a concerted effort to mitigate trade war damages and boost U.S. strategic investment without offering China a direct economic or political off-ramp.

The trajectory for U.S.-China trade relations in 2025 is one of continued tensions and increased confrontation, not reconciliation. To be frank, President Trump’s America First Trade Policy provides no roadmap for comprehensive engagement with China, and the political climate in Washington only reinforces a hardline stance. However, economic realities—rising inflation, fiscal constraints, and market volatility—may force the administration to make selective adjustments to avoid unnecessary damage. Businesses and capital markets should brace for uncertainty and fluctuations as tariffs, sanctions, and countermeasures escalate. But beyond the immediate trade war, a broader question remains: after nearly eight years of U.S.-China strategic competition, neither country is better off. The fundamental differences that drive this economic standoff remain unresolved, and while temporary deals and sectoral adjustments may continue, they will not address the root causes of the trade conflict and the broader strategic competition itself. Perhaps it is time for both countries to begin reworking these foundational issues, regardless of how long or difficult the process may be—because without a structural solution, the economic and geopolitical costs will only continue to mount.