Introduction

The USA and China are known to be the two largest economies in the world as both countries trade and produce a large amount of goods and services. The countries also have other factors allowing them to be claimed as the largest economies: China has a large population, exporting a huge amount of goods, and the USA has high consumer spending that allows its economy to expand. Both nations rely heavily on each other for trade; consequently, any economic shifts between them will affect the global economy, influencing businesses, governments and other economies.

Between 2017-2021, the topic of tariffs – taxes on imported goods – became highly relevant for both countries. At the start of 2018, when US president Donald Trump imposed tariffs on Chinese imports, China responded with retaliatory tariffs on imported goods from the USA (Economist, 2019). This escalated tension and began a trade conflict between the countries, known as the US-China Trade War. The USA introduced tariffs partly to protect industries and jobs, while China responded with retaliatory tariffs to protect its own producers and economic interests (OECD, 2023). The USA initially imposed tariffs as they wanted to encourage more manufacturing in America and reply to the claims of ‘unfair trade’ by China; China felt the need to enforce retaliatory tariffs as a reprisal against these US tariffs (CSIS, 2025). These reasons are a few of many which caused the economic rivalry between the USA and China to grow massively between 2017 and 2021. These tariffs notably affected consumers, businesses and workers.

Consumers would notice a major increase in the cost of living as higher prices occured in both countries, contributing to the short-term and the long-term impact of the tariffs. Furthermore, since these two countries are the largest global economies, the majority of countries and trades happening worldwide rely on one or both of the countries: China and/or the USA. Large and small business would also be affected by the imposition of tariffs, including higher costs for imported products and materials and lower profits. However, tariffs would be beneficial to some businesses; some industries would be able to sell more products because of the higher costs on imported goods. 

Employees and jobs would also be affected by both the positive and negative impacts of tariffs and retaliatory tariffs (Cavalcanti, Odega & Ornelas, 2025). Some domestic companies might hire more workers if the demand for their products increases due to the tariffs, meaning more jobs are available and allowing an increase in employment. However, the businesses who face higher costs due to tariffs may need to reduce the hiring of workers, creating a possibile increase in unemployment worldwide. Industries that have to rely on imported goods can also suffer from job losses as tariffs increase the cost of materials being imported. Retaliatory tariffs reduces goods and materials being exported into a country causing businesses to suffer from shortages and reduced sales. 

The US-China conflict caused international trade to slow down, leading to slower economic growth in many different parts of the world and many different regions. The conflict also brought opportunities to expand trade relations with either China or the USA and increased exports in some regions.

This paper seeks to answer the question: ‘What were the impacts of retaliatory tariffs imposed by the United States and China during the 2017-2021 trade conflict?’. This question allows us to understand the impacts of tariffs on various economies, assess the impacts of tariffs – such as whether they let trade policies achieve their desired outcomes – and to consider how this trade conflict affected the future of trade relations overall. This research paper will include the effects of this known trade conflict on both the USA and China, and also the effects of this trade war on trade relations and different international issues in the years between 2017 and 2021, including how it affected global supply chains. 

Hypothesis

The tariffs and retaliatory tariffs imposed by China and the USA had major impacts on international trade, both positive and negative, such as boosting exports for some nations and triggering retaliatory measures for others. Trade volumes directly affected the USA and China tariffs and caused severe disruptions in their economic relationship. The USA’s exports to China were heavily affected by the retaliatory tariffs imposed by China, impacting the USA’s agricultural sector and manufacturing industries. However, Chinese exports successfully re-routed trade boosting shipments to other nations such as Africa and Latin America (European Central Bank, 2026). The US tariffs on Chinese goods significantly increased costs and modified how certain businesses operate. The tariffs also had a significant impact on global trade: global trade restructured because of the trade war, shifting global sourcing patterns and international trade patterns while also promoting the re-routing of different supply chains away from China.

This research paper will provide factual resources from known organisations, such as the WTO (World Trade Organisation) and the IMF (International Monetary Fund), to indicate the different impacts of the US-China trade conflict and the relationship between the two countries throughout the 2017-2021 time period.

Literature Context and History

The trade conflict between the United States and China developed as a result of disagreements over trades political tensions. The trade between the two nations has increased after China joined the World Trade Organisation (WTO) back in 2001. China became one of the United States’ largest partners in trading, meanwhile American companies relied on Chinese imports and supplies. Nevertheless, a lot of concerns have arisen regarding the fact that China’s total value of exports at the time exceeded its total value of imports, as well as its intellectual property practices. 

In 2017, the American government started an investigation into China’s trade practices under Section 301 of the Trade Act of 1974. The investigation concluded that certain Chinese technology transfer and intellectual property related policies harmed American businesses. As a result, President Donald Trump announced tariffs on billions of dollars’ worth of imports coming from China. These tariffs were implemented in order to force China to change its trade and industrial policies. However, China responded by retaliating and imposing tariffs on American products. These tariffs heavily affected sectors that are highly significant to the US economy, including agriculture, manufacturing and the automotive industry. American soybean exports were especially affected, as China was a large market for US agricultural products. These defensive responses were the beginning of the trade conflict that would continue over the following years as both countries continued to increase tariffs on each other’s goods. The tariffs resulted in an increase in the value of products from tens of billions to hundreds of billions of dollars. This intensifying dispute caused many businesses to face rising costs and uncertainty in international trade. Numerous firms started to reconsider their supply chains in response to the changing trade environment. 

The efforts to resolve the trade conflict between the two countries led to the signing of the Phase One Trade Agreement in January 2020. As promised, China increased purchases of American goods and improved intellectual property protections; meanwhile, the United States reduced or suspended certain tariffs they were planning to implement. Even so, the effects of the trade conflict continued after the two sides signed the agreement. Researchers have thoroughly analysed the consequences of the US-China trade conflict. Current studies suggest that even though tariffs were implemented in order to protect domestic industries and influence trade behaviour, the costs for corporations and consumers have increased. Economists have discovered that the tariffs disrupted trade flows, affected export markets and contributed to uncertainty within the global economy. These discoveries deliver important context for understanding the aftermath of retaliatory tariffs that were imposed between 2017 and 2021.

Methodology

The benefits and the drawbacks of retaliatory tariffs imposed by the US and China during the 2017-2021 trade dispute are examined in this paper using a qualitative comparative case study methodology. As the research aims to understand complex economic, political and social impacts that are unable to be described by numerical data alone, a qualitative technique was used. The qualitative approach enables a more thorough examination of the broader impacts of tariffs and their effects on different stakeholders. Although quantitative studies offer useful data evidence about trade volumes, GDP growth, employment levels and pricing changes, the comparative case study approach is particularly suited as it enables for the analysis of several industries and nations impacted by the trade war. This study analyses the experiences of other participants, such as Chinese exporters, American manufacturing companies, American agricultural producers and other nations that profited from changes in international trade patterns, rather than concentrating just on the US and/or China. Through comparison, similarities and differences in the consequences of tariffs may be identified, providing for a more comprehensive understanding of the trade issue.

This paper predominantly uses secondary data that was collected from several reliable institutional and academic sources. Peer-reviewed journal articles, books on international political economy, reports from international organisations such as the IMF, the World Bank, the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organisation (WTO), as well as official publications from China and the United States, are some of these sources. In addition, statistical data concerning trade volumes, tariffs rates, export performance and economic growth are used to support the analysis. 

The ability to access in-depth studies conducted by economists, decision makers and international organisations is one of the main benefits of having access to secondary sources. This enables the research to reflect a wide variety of viewpoints and factual data. However, there are also some limitations. While economic statistics may change based on the techniques imposed by various institutions, certain studies could demonstrate ideological prejudices toward protectionism or free trade. To address these limitations, the study incorporates multiple sources and compares findings across different perspectives.

THEORETICAL FRAMEWORK

There are three major theoretical perspectives that guide the analysis of the US-China trade conflict, within the international political economy. 

The first is economic nationalism, which emphasises state intervention to protect domestic industries and strategic sectors. 

The second is liberal institutionalism; this highlights the benefits of open markets and international cooperation. 

The third is strategic trade theory, which suggests that government intervention may be justified in industries characterised by technological advantages and economies of scale.

INSTITUTIONAL FRAMEWORK

There exist several domestic and international institutions that played an important role throughout the trade conflict. Their actions influenced policy decisions, trade negotiations and assessments of the economic consequences of tariffs. These are the:

• United States Trade Representative (USTR);
• US Department of Commerce;
• Ministry of Commerce of the People’s Republic of China;
• World Trade Organisation;
• International Monetary Fund;
• World Bank.

Comparative Case Studies: Sectoral and Regional Impacts

To fully understand the consequences of the 2017-2021 trade conflict, it is necessary to examine specific case studies. Retaliatory tariffs did not affect all sectors or countries equally; they created distinct winners and losers across different industries and geographic regions. 

Case Study 1: The Agricultural Sector (United States)

The US agricultural sector, particularly soybean farming, is a primary example of negative impacts of tariffs. In 2018, China retaliated to US tariffs by imposing a 25% tariff on American made soybeans. At the time China was the largest buyer of US soybeans so this politically-strategic move targeted an economically crucial sector. 

Negative Impacts: US soybean exports to China dropped significantly, causing domestic prices to drop, leaving farmers with large financial losses. To prevent widespread bankruptcies, the US government intervened with bailouts funded by the American taxpayer. 

Trade Re-routing: This disruption caused a permanent restructuring of international agricultural trade. China changed its sourcing away from the US and towards Brazil, which unintentionally led to increased deforestation in Brazil and South America to meet the sudden increase in demand from China.

Case Study 2: Technology and Manufacturing (China and Global Supply Chains)

The technological sector shows how tariffs disrupted highly established global supply chains. The US imposed heavy tariffs on Chinese electronics, components and machinery, looking to protect domestic businesses and reduce reliance on foreign manufacturers.

Negative Impacts: Rather than reshoring manufacturing jobs to the United States, these tariffs increased production costs for American tech companies who use Chinese components. For China, the tariffs led to a slowdown in manufacturing output and lowered profit margins for factories in major industrial hubs such as Shenzhen.

Positive Impacts: To resolve issues caused by the tariffs, many transnational cooperations relocated their manufacturing out of China. This was a catalyst for structural shifts and economic development in Southeast Asian countries such as Vietnam and Malaysia. Southeast Asia experienced a massive surge in foreign direct investment (FDI) as a result, and the increase in exports boosted their GDP.

Case Study 3: The European Union and Third-Party Nations

The trade war demonstrated that political conflicts carry massive spillover effects on to third parties and international institutions, such as the WTO. 

Trade Diversion: Nations not directly involved in the conflict benefited from ‘trade diversion’. For example, the European Union saw increased exports to both the US and China as those nations looked for alternative suppliers. Similarly, Latin American and African nations found new markets for their commodities and raw materials. 

Discussion

Overall, retaliatory tariffs between the US and China had a relatively negative impact, damaging trade and diplomatic relations, resulting in huge losses for producers and indirectly impacting the environment.

One major negative impact was the example of tariffs on American soybeans, which affected farmers significantly and led to many bankruptcies as China found alternative sources. This affected Chinese consumers and factories who, at the time, were the largest customers of American soybeans. Eventually, it led to the restructuring of agricultural trade as China then opted to import soybeans from Brazil, leading to unintentional deforestation and long-term environmental impacts. Another significant con of the retaliatory tariffs was the increase of production costs for American tech companies. This, in the long run, affected the American consumer the most as it led to tech products, which were made using parts sourced from China, being produced at higher prices, leading to higher retail prices for products like the iPhone. It also affected Chinese companies, which were faced with slower manufacturing demand and lower profit. None of these tariffs re-directed production to American soil, which further emphasises their failure.

However, there were slight positive impacts, mostly as an indirect result, such as increases in foreign investment in certain South Asian countries due to the relocation of manufacturing outside of China. This shows that although tariffs aim to protect domestic industries, they often cause much greater impacts that outweigh the benefits of both tariffs and retaliatory tariffs. They also lead to the reduction of efficiency in countries and their factories, as evidenced in Chinese tech factories. Additionally, the impact extended beyond the two countries, affecting global commodity markets and leading to other countries benefitting from the redirected trade flows, like the South Asian example, where US tariffs led to investment into South Asian production facilities. Arguably, the global consumer was the most affected: despite the redirection of certain trade and production to avoid higher prices, it is not realistically possible to find alternatives for every single product, meaning that customers end up paying the higher price.

Overall, the evidence overwhelmingly suggests that the negative factors of tariffs and trade wars, especially the retaliatory tariffs between the US and China, outweigh the possible positives.

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