The trade war between the United States and China emerged as one of the most consequential geopolitical and economic confrontations of the twenty-first century, reshaping global commerce, supply chains, and macroeconomic policy-making. It did not happen suddenly; tensions had been simmering for years as Washington accused Beijing of unfair trade practices, intellectual property theft, forced technology transfer, and state-backed industrial expansion. The core contention from the American side was that China was manipulating its economy in ways that harmed the USA’s industry, kept American companies at a disadvantage, and distorted market competition. Washington pointed to China’s industrial subsidies, restrictions on foreign companies, and trade surplus with the United States, insisting that Beijing did not play by free-market rules. China, on the other hand, consistently rejected these allegations and argued that the United States was attempting to curb its rise as a global economic power. From the Chinese perspective, America’s complaints were less about trade fairness and more about a strategic attempt to contain China’s economic momentum and technological advancement. Chinese officials argued that the US benefited immensely from China’s market opening and cheap manufacturing for decades and was now reacting out of insecurity as China moved into higher-value industries, such as telecommunications, artificial intelligence, and green energy.
The trade war took a turn for the worse in 2018, when the US slapped tariffs on billions of dollars’ worth of Chinese goods, prompting China to retaliate and triggering a rapid cycle of escalating duties.
The trade war took a turn for the worse in 2018, when the US slapped tariffs on billions of dollars’ worth of Chinese goods, prompting China to retaliate and triggering a rapid cycle of escalating duties. This severely hit American farmers and manufacturers, disrupted the USA’s technical supply chains, and slowed China’s growth as exports and investor confidence declined. The confrontation quickly spilt over into the global economy, shaking markets, raising supply-chain costs, and pushing companies to diversify production. Export-reliant Asian economies felt the strain as trade volumes shrank and firms began shifting manufacturing to Vietnam, India, Bangladesh, Mexico, and others, driving the “China-plus-one” strategy. Commodity prices fluctuated and analysts warned of looming recession risks, fueling debate about a possible retreat from globalisation as countries revisited industrial and supply-chain policies. The trade war also highlighted emerging global blocs around technology and security, particularly forcing South Asian nations to carefully balance between US Indo-Pacific initiatives and China’s Belt and Road vision.
The situation eventually led to the signing of the “Phase One” trade agreement in January 2020. Under this deal, China committed to increasing purchases of American goods and services, especially agricultural and energy products, and pledged to strengthen intellectual property protections and avoid forced technology transfers. The United States, in return, agreed to scale back some tariffs, though many remained in place. In essence, the settlement did not fully end hostilities but rather paused escalation while both sides assessed long-term strategies. The pandemic that followed shifted global focus temporarily, yet the structural rivalry remained intact. USA’s restrictions on Chinese technology companies, export controls on semiconductors, and broader efforts to reduce dependence on Chinese supply chains continued. China accelerated its push for technological self-reliance and expanded economic ties with neighbours, courtesy of the Regional Comprehensive Economic Partnerships and the Belt and Road Initiative.
The subpar outcomes of the “Phase One Agreement” are largely attributable to the aggressive economic push of President Trump’s administration in recent months, which warranted a “Phase Two Agreement” between the USA and China. It, however, again marks a temporary de-escalation in the long-drawn confrontation, with both sides agreeing to scale back select tariffs, expand agricultural market access, and ease restrictions on critical minerals and technology inputs. Although it is not a full settlement, the truce definitely reduces immediate uncertainty in global markets, stabilises supply chains, and offers some breathing space.
For emerging economies, especially in South Asia, the trade war created both challenges and opportunities. Countries such as Vietnam and India gained from factories relocating, investment reorientation, and Western firms evincing interest in diversified supply chains. Bangladesh also benefited in the garments sector as buyers looked beyond China. Pakistan, however, remained relatively reactive rather than proactive. While it had a strategic advantage through the China-Pakistan Economic Corridor (CPEC) and geographic access to both China and the Indian Ocean, its industrial base and regulatory environment were not positioned to immediately absorb shifting investment flows. Nonetheless, the “Phase Two Agreement”, yet again, affords a pause to Pakistan. It calls for adopting a multi-layered strategy to manage risks and seize opportunities of fast-shifting global trade dynamics. It needs to build industrial capacity through diversified manufacturing, technology upgradation, and productivity gains, while ensuring CPEC Special Economic Zones (SEZs) evolve into true export-driven hubs. Regulatory and taxation reforms, predictability in policy, and streamlined customs are essential to attract any investment relocating from China. Parallel investment in workforce skills like engineering, energy security, and artificial intelligence-driven platforms can enable Pakistan to participate in advanced supply chains. Export diversification beyond textiles into pharmaceuticals, electronics, processed foods, and renewable technologies is crucial, duly supported by improved logistics across ports, rail, and warehousing. Targeted outreach to multinational firms, sector-specific incentives, and strengthened financial markets with export-credit facilities will help domestic industries scale and integrate into global production networks.
In short, the US-China trade war has disrupted global norms, reshaped supply chains, and reinforced the importance of economic nationalism and industrial security. While its direct confrontation softened with the two-phased agreements, the underlying rivalry continues to simmer, influencing technology competition, investment flows, and strategic alignments. For emerging economies in South Asia, especially Pakistan, the challenge lies in adapting to a world where strategic positioning matters as much as economic efficiency. By improving domestic capacity, pursuing balanced diplomacy, and actively attracting large-scale manufacturing relocation, Pakistan can not only mitigate risks but also convert this global shift into a long-term development opportunity. It is thus evident that the spoils of war are up for grabs.
The writer is a freelance columnist and can be reached at zulfiqar.shirazi @gmail.com