The United States has escalated its trade war with China by imposing an additional 10% tariff on all Chinese products. In response, the Chinese government, led by Xi Jinping, has announced retaliatory tariffs. China has imposed an additional 15% tax on coal and LNG imports from the U.S. and a 10% tariff on crude oil.

Despite these countermeasures, the Trump administration is unlikely to be significantly affected, as the U.S. imports a large volume of goods from China, whereas China purchases fewer products from the U.S. As a result, the impact of tariffs on the U.S. economy will be relatively limited. On the other hand, this situation could be extremely challenging for Chinese companies, as the U.S. has traditionally been a major market for them.

The rising prices of Chinese products will make it difficult for them to sustain in the market. This is why the United States has taken an aggressive stance against China. In the tariff war, the Donald Trump administration has given Canada and Mexico a one-month reprieve but has imposed tariffs on China with immediate effect.

Donald Trump has stated that China has failed to curb the smuggling of the drug fentanyl, which is illegally entering the U.S. and being widely used for substance abuse. The impact of China’s retaliatory actions on the U.S. will be limited, as the U.S. exports only a small amount to China.

In terms of crude oil, China’s dependence on the U.S. is minimal, importing only 1.7% of its total requirement from America. Additionally, China’s LNG imports from the U.S. account for just 5%.

The ongoing tariff war could impact stock markets worldwide. Prices of crude oil, LNG, and other commodities may decline, but in the long run, China will bear the brunt of it. If the tariff war with the U.S. escalates further, it could be an opportunity for India.

During the COVID-19 pandemic, many companies moved their manufacturing out of China and chose India as an alternative. A similar trend could emerge again, with several American tech companies setting up their units in India. If this happens, India could benefit from the classic “third party gains from two competitors” scenario.

For now, the coming months may be dominated by trade war tensions. It remains to be seen how China counters the strict measures imposed by the Donald Trump administration.