China, which has become an indispensable player in global manufacturing and international trade, reached an economic size of $19.6 trillion in 2025. In 2024, the country recorded a trade surplus of $992 billion, significantly impacting the global automotive sector. While Chinese automotive companies outperformed their Western counterparts, Japan, Germany, and other nations began taking additional measures to compete with Chinese firms.
Moreover, the commercial liberalization that began in 1978 and has now made competing with Chinese companies challenging. According to the latest figures, China’s automotive industry has achieved the highest vehicle production numbers in the world. Global actors like South Korea, Japan, and Germany are struggling to compete with Chinese companies.
As an indication of this difficulty, efforts to increase customs duties against Chinese firms have emerged. Yet, the tariff measures frequently imposed by the United States on Chinese companies have not been successful. Given the current state of the US-China trade deficit and China’s manufacturing prowess, competing with Chinese giants remains a daunting task. Policies focusing on competition and technology rather than restrictive and obstructive measures should be preferred.
With China producing 39 percent of the world's vehicles in 2024, competing with the country is becoming increasingly difficult. Chinese automotive giants, which have increased R&D spending, ensured fast deliveries, and produced at lower costs, are outperforming key players such as the European Union, Japan, South Korea, and the US.
A similar situation is evident not only in the automotive sector but also in other areas of the manufacturing industry. The recent performance of Chinese smartphone companies serves as an example. Huawei, Xiaomi, and Oppo have stood out in global sales following the pandemic, which is significant in the context mentioned above.
While Chinese products were perceived as cheap and low quality decades earlier, they are now comparable to Western goods. The country, distinguished by its position in global trade and investments, has globalized its production lines with $2.2 trillion in foreign investments. The undertaking of trillion-dollar projects by Chinese firms cannot be considered independently of these developments. In recent years, the country has converted even greater amounts of incoming investment into outbound investment, taking advantage of the pandemic.
China, which has increased its share of the global economy and trade, is now facing what is referred to as new trade wars.
Following the Global Financial Crisis, customs tariffs against China saw a significant increase. The trade dominance that China achieved post-crisis has continued to grow to this day. As evidence of this, Western countries began requiring government approval for acquisitions of domestic companies by Chinese firms. China’s cost advantage has transformed into a trade advantage.
Despite preventive and couteractive measures against China, Western countries have continued to experience record-level trade deficits with China. Consequently, China’s foreign trade volume has reached $6.2 trillion, and reserves in the Chinese central bank have surpassed the unprecedented figure of $3.2 trillion. Considering China’s technological capacity and production strength, new trade measures that the country may face in the coming years are unlikely to achieve the desired success.
The new US administration has brought new customs duties back into focus. If China responds with reciprocal tariff increases on US goods, significant economic losses could ensue. Research estimates the total cost could be approximately $200 billion. According to projections by the Peterson Institute for International Economics, these costs could climb even higher in the future.
Trade wars between the world's largest economy and its largest trading partner pose a serious risk to the global economy. However, given the production capacity and competitive edge of Chinese companies, it is expected that the US will face greater negative impacts in the medium and long term.
Mexico and Canada are among the other countries facing extra US customs duties. Discussions go on about applying similar measures to the European Union. While the customs tariffs imposed by the US on its allies may boost public revenues in the short term, such protectionist policies could significantly harm the welfare of nations and undermine cooperation between nations. In the medium term, these measures are likely to reduce trade and exacerbate economic tensions.
When evaluating the trade wars that have been on the agenda since 2017, it is evident that the US foreign trade deficit has decreased partially but has not reached the desired levels. According to the US Census Bureau, the total foreign trade deficit with China amounted to $2.73 trillion between 2017 and 2024.
Current data clearly indicate that the US has not achieved its intended success in reducing its trade imbalance with China. Washington is unlikely to yield satisfactory results with new tariffs.
Dr Deniz İstikbal is an economics researcher with Istanbul Medipol University.
The views do not necessarily reflect those of China Daily.
