Many scholars view the trade war as a manifestation of the Thucydides trap—when a rising power threatens to displace an established one, conflict becomes inevitable. But the conflict’s roots are far deeper than mere economic resentment. The United States’ massive trade deficit with China has been a major catalyst for the dispute, but Washington also blames Beijing for state-led policies that make it harder for U.S. companies to compete in China’s booming economy. Moreover, global value chains increasingly feature final assembly in countries like Vietnam and Mexico, forcing multinational corporations to rethink their sourcing strategies.
Ultimately, both sides are likely to suffer in the trade war. High tariffs reduce consumer demand for goods and services from other countries, which in turn reduces exports and income from those imports. Moreover, higher import prices can trigger the “multiplier effect,” in which every dollar of additional tariffs reduces exports by about four dollars.
The best way to prevent a trade war is through diplomatic engagement, open communication, and negotiations of fair trade agreements. Focusing on shared economic goals—such as global climate change solutions or joint technology projects—can help align interests and defuse tensions. It’s also important to prioritize patient and flexible engagement during negotiations, and to use clear, fact-based public communications that emphasize the mutual benefits of cooperation and the costs of a prolonged conflict.
Finally, it’s crucial to prioritize addressing root causes of the conflict—whether they be intellectual property concerns, tariff imbalances, or unfair trade practices—through multilateral channels such as the World Trade Organization. In addition, countries should seek mutual market liberalization and rely on WTO rules to settle disputes.
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