Why Has Us-china Trade War Started and How Have Markets Reacted
The US China trade war has resumed in 2026 due to the Trump administration pursuing aggressive tariff policies against Chinese imports, with the G20 now divided over the agenda.
Markets have experienced significant volatility, with uncertainty around tariff implementation creating downward pressure on equities and increased capital flight to safe haven assets.
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Root Causes
The administration has prioritized reshoring manufacturing and reducing the US trade deficit through tariffs on Chinese goods. Diverging US China trade data now points to tariff evasion, suggesting companies are routing goods through third countries to avoid duties. These enforcement challenges have pushed policymakers toward broader tariff increases.
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Equity markets have declined on recession concerns tied to higher input costs and retaliatory measures. The uncertainty surrounding implementation has benefited treasuries and the US dollar as investors seek stability. Trade related stocks, particularly in technology and consumer goods, face pressure from supply chain disruption fears and potential Chinese countermeasures against North American exporters.