Recently, both the United States and China have halted further tariff increases, signaling a new turning point in their trade relationship.
When tariff rates exceed 100%, consumers tend to choose substitutes over expensive imports, making additional tariff hikes more of a political symbol than an economic tool.
As a result, the tariff war is drawing to a close, and a new stage of economic conflict a currency war is expected to begin.
According to 2024 statistics, the US exports approximately 260 trillion won to China, while China’s exports to the US amount to about 690 trillion won.
This stark trade imbalance is a core factor driving the conflict. In this blog, we will explore the conclusion of the tariff war, the rise of the currency war, and the resulting shifts in the global economy.
The Cessation of Tariff Escalation in US-China Trade
Both the United States and China have signaled an end to further tariff increases.
The US has determined that raising tariffs beyond 145% is unnecessary, while China has stated it will no longer respond to additional tariffs.
The mutual stance of both nations stems from a clear and logical reason: the trade relationship between these two economic powers has been fundamentally altered.
The Economic Threshold of Tariffs
Economic principles indicate that when tariff rates surpass 100%, consumer behavior shifts significantly.
Rather than selecting the increasingly expensive imported goods, consumers opt for substitute products.
Consequently, raising tariffs further whether to 120% or 200% serves more as a political statement than a means of delivering economic impact.
The Shift to Currency-Based Economic Conflict
As a result of this tariff escalation reaching its limit, the initial phase of the economic confrontation between the US and China is concluding.
The next stage is anticipated to involve a currency war, where exchange rates and monetary policies will emerge as the primary instruments of competition.
Current Trade Imbalance Statistics
According to 2024 statistics, the US exports approximately 260 trillion won worth of goods to China, while China’s exports to the US amount to about 690 trillion won.
This significant trade imbalance highlights the underlying economic tensions driving these developments.