Risks that the trade war between Washington and Beijing could evolve into a second Cold War

Since the start of Donald Trump’s second term in January 2025, relations between the United States and China have entered a new phase characterized by a sharp escalation in confrontation and an increasing unpredictability. This situation recalls the strong similarities with the competition that prevailed between the United States and the former Soviet Union during the Cold War, especially with the U.S. president adopting a series of policies and measures deemed necessary to protect American interests and achieve economic self-sufficiency, which, in turn, has provoked swift and strong responses from China.

The renewed competition between Washington and Beijing is no longer limited to the economic sphere; it has extended to technology, security, and ideological rivalry. Both sides have adopted an increasingly nationalistic rhetoric and a zero-sum perspective on international relations. Trump’s transactional approach, characterized by short-term tactics, has further reduced the space for traditional diplomacy and weakened efforts to build long-term alliances, adding more fog and tension to the international scene.

Multiple Indicators

Many U.S. analyses indicate that the escalating trade war between the United States and China during Donald Trump’s second administration could lead to a second Cold War between the world’s largest economic powers. These indicators include:

Trump’s Tariff Increases on Chinese Imports: The economic confrontation between the U.S. and China has seen unprecedented escalation since Trump returned to the White House for his second term. His administration has adopted a sharply hostile stance toward China, exemplified by raising tariffs on Chinese imports to levels that could reach 245%, the highest in the history of U.S. trade relations. This move is part of a broader strategy aimed at reducing American economic dependence on Chinese products and advancing American self-sufficiency, even at the cost of disrupting global supply chains and raising living costs for U.S. citizens and businesses. Some U.S. analyses suggest that these measures confirm a shift in American views of China from economic partner to strategic adversary.

U.S. Restrictions on Chinese Technology Companies: In addition to tariffs on Chinese imports, Trump’s second administration imposed stringent restrictions on Chinese technology companies, blacklisting over fifty firms and expanding oversight on advanced technology exports, including AI chips and quantum computing. Washington justifies these measures on national security grounds, claiming they are necessary to prevent accelerated Chinese military modernization, but they practically serve to isolate China from vital innovations and international markets.

China’s Tariff Increases on American Goods: China swiftly and forcefully retaliated against the tariffs imposed by Trump’s administration on Chinese imports by applying counter-tariffs that reached 125% and imposing restrictions on strategic exports, notably rare earth metals essential for technology and energy industries. Beijing has clearly stated that it will not engage in any negotiations unless the U.S. lifts its unilateral tariffs. These steps highlight a shift in trade relations toward an economic retaliation policy, threatening global market stability and paving the way for prolonged trade wars.

Dismantling Economic Ties between Washington and Beijing: The economic relations between the U.S. and China are witnessing a rapid disintegration due to the stringent protectionist policies pursued by Trump’s administration and Beijing’s strong responses. After decades of deep interconnectedness through global supply chains and bilateral investments, Washington has begun to adopt a policy of “economic decoupling” from China, imposing hefty tariffs and strict limitations on imports and investments, particularly in vital technology sectors. This approach aims not only to reduce the trade deficit but also to reshape the economic landscape to limit U.S. dependence on Chinese products and enhance domestic manufacturing.

In response, China has embarked on similar steps to reduce its exposure to the U.S. economy by supporting domestic industries, accelerating efforts towards “self-reliance” in fields like semiconductor chips and energy, and expanding trade partnerships with alternative countries. This gradual decoupling has led to a decline in trade volume and direct investments between the two countries and negatively impacted multinational corporations, which are reassessing the viability of continuing their operations in an unstable political and economic environment. Consequently, the world is moving towards a more fragmented economic system dominated by competing blocs, rather than the intertwined globalization that characterized previous decades.

Escalating Nationalistic Rhetoric in American and Chinese Discourses: The trade war between the U.S. and the rising tensions over control of technology and resources coincide with increasing nationalism in American and Chinese discourses, as both sides feel that the confrontation has transcended mere economic issues to become part of a broader struggle for global dominance and influence. China has amplified its nationalistic rhetoric, viewing American actions as attempts to hinder its rise and a threat to its sovereignty. Conversely, President Trump frames this confrontation as a battle to defend “American economic independence” and restore U.S. global dominance.

The political discourse in both countries has taken on a combative tone, with each side promoting narratives of “defending national interests” and “confronting external threats.” The rise of this nationalistic rhetoric reinforces narratives of civilizational conflict and mutual threat, complicating diplomatic or economic settlements and deepening the divide between the two nations, evoking memories of the international polarization that marked the Cold War, with wide-ranging implications for global stability and economic growth.

The United States Portraying China as an Ideological Competitor: The trade war between the United States and China is closely linked to the American perception of China as an ideological adversary that challenges the core values of the global liberal order. Since the onset of Donald Trump’s second term, the confrontation with China has not been limited to economic or technological aspects, but has taken on a distinct ideological character, with the U.S. administration portraying the Chinese Communist Party as a fundamental threat to democracy, human rights, and the rule of law.

Senior officials have clearly articulated this trend, viewing the Communist Party as an “illegitimate regime” that adopts repressive policies in Hong Kong and Xinjiang. This rhetorical escalation signifies a break from decades of engagement policy with China in favor of a new perception that regards it as a strategic adversary that needs to be contained. This framing of the conflict as a struggle between two opposing civilizational models has not only intensified U.S. policies but has also contributed to global polarization and created an atmosphere of suspicion and tension reminiscent of the Cold War era between the United States and the Soviet Union.

Dismantling the System

In conclusion, the measures being adopted by the United States and China amidst the escalating trade war during Donald Trump’s second presidential term resemble the economic blockade wars used during the Cold War, indicating a fundamental shift in American policy from economic engagement to a strategy of containment. This approach has deepened the rift between the world’s two largest economies and has prompted several of America’s allies to adopt similar policies, accelerating the disintegration of the global trading and technological system that has existed for decades and reshaping global trade chains while undermining global economic stability.

According to estimates from the International Monetary Fund, the division resulting from the formation of competing trade blocs between the American and Chinese spheres could lead to a loss of up to $7 trillion in global GDP. Trade between U.S.-aligned blocs and those connected to China has decreased by 12% since 2022, similar to trends observed in the early stages of the Cold War. Developing countries are at the heart of this crisis, facing losses of up to 10% of their national output due to reduced flows of technology and investments.