Abstract
The global supply chain refers to the entire process of sourcing, producing, and distributing goods or services from original suppliers to end-users across international markets. Beginning in March 2018, escalating trade tensions between the United States and China initiated a trade conflict that quickly influenced global economic activities. The repercussions of this trade war have extended beyond the two nations, significantly disrupting global trade systems and supply networks. Although it remains challenging to quantify the precise consequences, the continued globalization of markets and the critical role of technological advancements indicate that the effects are both widespread and ongoing. As the long-term implications become clearer, businesses are increasingly compelled to reassess and adapt their supply chain models to sustain efficiency and profitability. This paper outlines the core issues surrounding the trade conflict, evaluates its impact on international supply chains, and suggests strategic recommendations to mitigate associated risks and enhance supply chain resilience.
Keywords: US-China Trade Conflict, Global Supply Chain, Tariffs, Trade Policy© The Author(s) 2025. Open Access This article is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License, which permits any non-commercial use, sharing, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if you modified the licensed material. You do not have permission under this licence to share adapted material derived from this article or parts of it. The images or other third-party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit https://creativecommons.org/licenses/by-nc-nd/4.0/
1. Introduction
1.1 The Current State of the US-China Trade Conflict
Recent shifts in global politics have intensified the already fragile relationship between the United States and China. Following more than a year of fruitless negotiations, trade disputes escalated significantly by late April 2019. Both nations, recognized as the world’s two largest economies, continued to impose reciprocal tariffs in rapid succession. These heightened measures have added new layers of complexity and tension to their economic interactions. As trade frictions mount, the ripple effects are expected to extend to everyday consumers, influencing prices and access to goods sooner or later [1].
1.2 The Global Supply Chain Under Strain
SEMI, a global organization that oversees developments in the electronics industry, has expressed deep concerns about the potential breakdown in global market continuity [2]. Such a disruption would not only complicate consumer access to electronics but could also threaten the openness and accessibility of international trade routes that are crucial for maintaining a balanced and efficient market economy. This raises a critical question: how are worsening trade relations between the US and China influencing the international electronics supply chain, and what implications does this hold for global consumers? While the issue is multifaceted and influenced by numerous variables, the following discussion explores the most probable outcomes [2].
Impact on Consumer Products
A widely accepted perception is that a significant proportion of everyday consumer products are either wholly or partially manufactured in China. As such, trade tensions risk having profound effects not just because of price shifts, but due to the extensive dependency on Chinese-made goods in our daily routines. Newly introduced tariffs specifically target Chinese imports, including well-known electronics brands such as Apple. Additionally, the semiconductor sector—a critical component of electronic devices—is also vulnerable. Since semiconductors are essential for assembling electronic circuits found in devices like smartphones and laptops, any disruption in their production or supply will be felt across the tech industry [2]. As manufacturing costs for semiconductors increase, the price of electronic components is expected to follow suit. Consequently, consumer electronics may become more expensive to produce and sell. Although immediate changes in pricing might not be noticeable, over time, consumers are likely to experience upward trends in the cost of electronic goods [2].
China’s Strategic Countermeasures
While the implementation of tariffs plays a substantial role in disrupting global supply networks, China’s strategic retaliation introduces additional volatility. Its response could go beyond simple tariff adjustments and include broader regulatory and diplomatic maneuvers. For example, state-backed campaigns encouraging citizens to boycott US-made products could gain substantial momentum due to China’s controlled media landscape [2]. Moreover, Chinese regulators could deliberately slow down or obstruct approvals for international trade deals involving American firms. This tactic could severely impact US businesses that either operate within China or rely on Chinese manufacturers. Even those with limited exposure to Chinese suppliers may be compelled to restructure their operations, either by shifting production elsewhere or facing higher costs [2]. This is not purely speculative—China has resorted to similar countermeasures in the past. At the very least, American consumers might notice price hikes in various manufactured products, and companies could be forced to reorganize their global supply strategies. In a more severe scenario, such retaliatory tactics could stifle international trade flows and investment channels for many years to come [2].
Sourcing from the United States
Although much of the attention surrounding the trade conflict focuses on Chinese imports, American exports to China are equally under scrutiny. While physical products from China play a critical role in US consumer goods, it is also true that American hardware, software, and service industries contribute substantially to China’s product innovation and manufacturing sectors [1]. However, due to new limitations and trade barriers, transferring certain types of hardware, digital solutions, and business services has become increasingly difficult. This has driven companies to explore alternative sourcing and partnership options, resulting in disruptions throughout the global electronics ecosystem. These adjustments have complicated production chains and, in many cases, led to increased manufacturing costs, which may eventually be passed on to consumers. In essence, both Chinese and American enterprises now face heightened barriers due to new tariffs and persistent trade hostilities [1].
Wider Global Repercussions
Although the primary players in this dispute are the US and China, the effects of their escalating conflict have rippled through the global economy. Precise outcomes are still difficult to anticipate, but as globalization advances and technological dependencies deepen, the resulting shifts are being felt far beyond the borders of the two nations involved [2]. Manufacturers around the world are now under pressure to reevaluate their logistical and supply frameworks. Maintaining profitability in such a volatile environment will likely require strategic changes and restructuring efforts across various sectors. At present, most major supply chains are interlinked with China in one way or another, and critics suggest that China has strategically leveraged this central position to its advantage [2]. This evolving trade standoff could potentially reduce China’s manufacturing dominance. Whether it prompts a broader redistribution of industrial influence or a long-term transformation in the global production hierarchy remains to be seen. The outcome of this ongoing dispute could very well redefine international manufacturing dynamics in the years to come [2].
2.Theoretical Framework
2.1 Evolution of the US-China Trade Dispute
The trade standoff between the United States and China has been prolonged, tense, and largely unresolved. Although the two countries signed a preliminary “Phase 1” agreement in early 2020, underlying conflicts persist. Experts noted that China urged the US to eliminate tariffs, while former President Donald Trump resisted, calling for greater concessions from Beijing, which Chinese officials viewed as antagonistic and one-sided [12], [23]. In a statement made on November 19, 2019, President Trump warned that tariffs on Chinese goods would be raised further if no deal was reached. Alongside him, US Trade Representative Robert Lighthizer insisted that removing tariffs without addressing core trade issues—such as forced technology transfers and intellectual property violations—would be a strategic failure for the US [5], [34]. Negotiators from both countries struggled over how to link tariff reductions with the commitments previously outlined in the failed May 2019 agreement. China demanded immediate removal of all tariffs introduced after that date, with a phased rollback of remaining duties. Yet, both legislative and trade experts in Washington believed that even finalizing the current stage would be a difficult achievement—casting doubt on the feasibility of a more comprehensive “Phase 2” deal [27], [49].
At an October press event with Chinese Vice Premier Liu He, President Trump expressed optimism about proceeding to “Phase 2” after concluding “Phase 1.” Trump suggested this future phase would specifically target Chinese practices such as compelling American firms to share technological know-how, which he argued was tantamount to theft [14], [31]. According to internal sources cited by Reuters, the looming 2020 US presidential election, delays in trade negotiations, and the Trump administration’s preference for unilateral pressure over multilateral alliances left little momentum for a more expansive trade agreement [28], [43]. Chinese authorities, meanwhile, appeared in no hurry to advance negotiations. One senior Beijing official remarked, “These deals are Trump’s concern—not ours. We’re in no rush” [7]. Within the Trump administration, top priorities included showcasing China’s commitment to purchase vast quantities of US agricultural goods—a public relations win for the president’s re-election campaign. Economists warned that the prolonged 16-month conflict had created serious instability for firms that rely heavily on Chinese markets, while also threatening broader global economic performance [2], [37]. President Biden’s trade agenda, as outlined in the 2021 USTR report to Congress, shifted focus toward restoring relationships with allies and prioritizing labor protections. The report called attention to China’s industrial overcapacity and “market-distorting practices,” describing them as systemic threats to fair global trade [15], [52]. In written testimony to US lawmakers, Katherine Tai, Biden’s nominee for US Trade Representative, pledged to aggressively challenge China’s coercive trade actions. She emphasized the importance of fully utilizing the enforcement provisions embedded within the Phase 1 deal, particularly in areas related to intellectual property [8], [45].
Technology as a Strategic Battleground
Technology has become a central front in the US-China economic rivalry. Major Chinese firms such as Alibaba, Tencent, and Baidu have been funneling investment into Silicon Valley in pursuit of innovation and advanced technologies [21], [46]. To curtail this trend, the Trump administration expanded the powers of the Committee on Foreign Investment in the United States (CFIUS), enabling it to block foreign acquisitions involving critical tech assets. These measures significantly curbed Chinese outbound investment—nearly 75% of Chinese tech-related M&A proposals faced intervention or rejection [10], [36].
Targeted Sanctions: ZTE and Huawei
ZTE, a leading Chinese electronics and telecom company, was severely penalized by the US for breaching international sanctions against Iran and North Korea. As part of these sanctions, the US government banned American firms from supplying ZTE with software and hardware components. Since many ZTE products relied on American-made semiconductors, the company was forced to shut down key facilities across the globe [1], [30]. President Trump initially called on the Commerce Department to relax the ban, but the House Appropriations Committee overruled that effort. In fact, they passed an amendment ensuring that the export ban would remain in place until at least March 2025. This showed a bipartisan consensus in Washington that punitive actions against ZTE should continue, serving as a broader warning to other Chinese firms suspected of violating trade and national security laws [11], [41]. Huawei, the world’s second-largest smartphone manufacturer after Samsung, faced even stronger US action. Along with two subsidiaries and its CFO, Meng Wanzhou, Huawei was indicted on 13 counts including bank fraud, conspiracy, and evading US sanctions by dealing with Iran through front companies like Skycom Technologies [3], [35].
In addition, Huawei faced accusations of intellectual property theft from T-Mobile and other American tech companies. The US government revealed that Huawei even offered bonuses to employees who successfully acquired proprietary innovations from competitors [9], [33]. Meng Wanzhou was arrested in Canada on December 1, 2018, at the request of the US government, and an official extradition request was filed in January 2019 [4], [50]. The US crackdown on Huawei was widely interpreted as a strategic move aimed at undercutting China’s broader “Made in China 2025” initiative, in which Huawei played a flagship role. This action significantly weakened Huawei’s global position and further intensified China’s push to reduce its dependency on Western markets and technologies [6], [40], [55].
2.2 Understanding the Supply Chain Framework
A supply chain encompasses all organizations, either directly or indirectly involved, that contribute to fulfilling customer demands. This includes the end-to-end movement of materials, starting from initial suppliers and culminating in the delivery to final consumers. As explained by Chopra (2012), the supply chain involves not only manufacturers and suppliers but also intermediaries such as logistics providers, storage facilities, retailers, and consumers themselves [19]. Each supply chain is made up of a network of interconnected businesses, and a single organization can operate within multiple supply chains depending on its range of products or services. Consequently, the design and structure of supply chains vary by product category and service type.
Supply Chain Management (SCM) refers to the coordination and control of supply and demand across an organization’s value chain. It involves overseeing and streamlining all activities related to sourcing, production, transportation, and delivery. Successful SCM requires cohesive collaboration between all stakeholders across the supply network to ensure that customer satisfaction is prioritized [24]. Every product or service that reaches the market does so via a supply chain. These networks may differ in complexity and size, but they all share one critical feature: the customer is the ultimate source of revenue for all parties involved. When entities within a supply chain make decisions in isolation without considering the chain as a whole, it leads to inefficiencies—resulting in higher prices, poor responsiveness, and reduced demand [11].
In a globalized setting, a supply chain transforms into an international ecosystem of companies, personnel, data, logistics, and resources. Its function is to move goods and services from origin to consumer. This integrated structure not only covers manufacturing and procurement but also involves shipping firms, warehouse managers, wholesalers, retailers, and the end-users [36]. From sourcing raw materials and processing components to final delivery, each step is carefully orchestrated within the supply chain to ensure that the end product meets market expectations in terms of timing, quality, and availability.
2.3 Importance and Strategic Impact of Supply Chains
In today’s business landscape, supply chains serve as a vital backbone of efficient production systems and competitive strategy. When managed effectively, a supply chain enables firms to:
- Establish streamlined and coherent operational systems
- Minimize exposure to unforeseen disruptions
- Enhance brand reliability by consistently delivering high-quality products to market on time
- Expand business operations and integrate into the global economic arena [22]
A global CEO survey revealed that nearly 90% of corporate leaders prioritize supply chain optimization in response to increasing market pressures, tighter price margins, and rising procurement costs [44]. Well-designed supply chains build customer loyalty, generate shareholder value, and offer organizations the flexibility to expand strategically across regions.
In the current era of intense competition, a company’s supply chain has become a critical differentiator. Leading corporations such as Dell and Wal-Mart have demonstrated that a responsive and agile supply chain can deliver profit margins 4% to 6% above industry averages [39].
Further independent research highlights that companies like Apple, Coca-Cola, and Samsung have used their supply chain efficiency as a key strategic tool—resulting in market valuations 40% higher than their closest competitors [51].
Quantitatively, effective supply chain management has been associated with:
- A 25% to 50% reduction in overall supply chain expenditures
- Decreased inventory holdings by 25% to 60%
- Forecasting accuracy improvements ranging from 25% to 80%
- Faster order fulfillment cycles by 30% to 50%
- Post-tax profit growth of up to 20% [16], [48], [57]
These figures illustrate that beyond operational efficiency, strategic supply chain performance directly contributes to financial strength and long-term sustainability in the global marketplace.
3.Analytical Framework and Methodological Approach
3.1 Evidential Reasoning Approach
This study employs a fact-based reasoning strategy that leverages logical arguments, established data, and verified information to explore how the US-China trade dispute has influenced the global supply chain. By selecting relevant arguments and supporting them with credible references, the analysis strengthens the overall validity and persuasiveness of the research findings.
3.2 Structural Analysis Method
The analytical approach adopted here involves breaking the subject matter into distinct segments, allowing for a deeper investigation of its individual components. By examining these elements according to specific relationships and criteria, the method facilitates a comprehensive evaluation. This technique enhances understanding by revealing multiple dimensions of the issue. Moreover, the use of illustrative frameworks and conceptual diagrams helps convey complex ideas more clearly, avoiding abstract and overly technical language.
3.3 Explanatory Technique
An explanatory method has been applied to clarify the concept of the global supply chain and its practical implications. This involves presenting detailed, reader-friendly explanations to make intricate topics more accessible. By simplifying terminology and describing abstract terms in relatable language, the article enables readers to grasp the subject matter with greater ease and accuracy.
3.4 Evaluative Commentary Method
A critical review method is also utilized to assess and reflect on the nature of global supply networks and the consequences of the US-China trade war. This includes offering balanced insights, factual observations, and reasoned opinions. While grounded in objective data, this method allows room for subjective interpretation to express thoughtful analysis and professional judgment on the topic at hand.
4.Assessment of the US-China Trade Conflict’s Impact on the Global Supply Chain
4.1 Global Supply Chain Repercussions of the US-China Trade Dispute
Trade between the United States and China constitutes a small portion of US GDP—exports to China account for under 1% of GDP and represent about 8% of America’s total export volume. Conversely, nearly 4% of China’s GDP is generated from shipments to the US, equating to 20% of its overall export earnings. Additionally, goods sold to the US contribute roughly 3% of China’s total value-added production [17], [38]. Although American firms maintain significant operations within China, unresolved tensions suggest that China’s economy stands to face more immediate and severe disruptions compared to the US. Should hostilities intensify, China’s losses could deepen substantially. The “America First” strategy once championed by President Trump promotes protectionism, which, if pushed further, risks escalating a broader, multilateral trade conflict beyond just two nations [12], [33].
Tariff measures, if further imposed, would affect global economic output—potentially reducing global GDP by 1–3 percentage points in the coming years. As the world’s manufacturing epicenter, China plays a key role in international production networks. US-imposed tariffs could disrupt multinational supply chains and ultimately hurt American corporations more than the Chinese firms they were designed to target [20], [41]. The resulting price increases from these tariffs are expected to trickle down to the US consumer, undermining the manufacturing jobs that these policies aim to protect. Moreover, the repercussions extend well beyond the US and China. According to a DBS analysis, nations such as South Korea, Malaysia, and Taiwan, which are deeply integrated into global production chains and maintain high trade exposure, are particularly vulnerable. For example, projections show that South Korea’s GDP could decline by 0.4% in a single year, potentially doubling the following year [9], [52].
Further dissection of Chinese export surplus based on contributing economies shows Taiwan as the most heavily involved in those goods (over 8% of GDP), followed by Malaysia (6%), and other regional partners such as South Korea, Hong Kong, and Singapore ranging between 4% to 5% [27], [44]. Countries that rely more on services or consumption than exports will feel fewer direct effects; manufacturing economies, however, will bear a disproportionate burden. Global trade saw an 11% rise in merchandise exports last year, but overall trade volumes dipped by 0.5%, creating a net loss of 0.1% in global economic expansion. Inflation rates are also anticipated to rise in response [28], [39].
Notably, two-thirds of trade flows between the US and China involve globally interconnected value chains. According to the Institute for International Economics, a substantial percentage of products imported into the US from China originate from foreign-invested entities. Thus, even tariffs directed specifically at China inadvertently impact countries with capital invested in Chinese manufacturing—particularly the US, Japan, and South Korea [3], [31]. Some economic experts argue that the US may suffer more than expected, as American companies maintain vast operations in China. The trade tensions are also not limited to China; the US has engaged in disputes with several other trade partners. Rising uncertainty discourages bank lending in affected sectors and weakens business confidence, causing hesitation in investment. If the financial impact reaches consumers, domestic demand could weaken, and stock market fluctuations could magnify these trends globally [5], [47].
4.2 Effects on Vietnam’s Economic Landscape
In 2017, China and the US represented two of Vietnam’s top trade partners—China accounted for 16.5% of Vietnam’s export earnings, while the US made up around 19.4%. On the import side, Vietnam sourced 27% of its total imports from China and just 4.3% from the US. When either of these economies applies trade barriers, Vietnam’s trade with both faces indirect consequences [15], [42]. Vietnamese exports to China, particularly raw materials and semi-finished goods used for re-export manufacturing, are highly cost-sensitive and will be directly impacted by increased tariffs. At the same time, Vietnam relies heavily on imports of intermediate goods and technology from China, which dominate its total import value. This dual dependency amplifies Vietnam’s exposure to volatility triggered by the trade war [18], [56].
A study from the China Research Division at Vietnam’s Institute for Economic and Policy Research revealed that over 50% of Vietnamese exports to China consist of raw or partially processed products. In turn, these goods are processed in China into value-added commodities and then exported—sometimes back to the US or EU. Notably, about 80% of industrial firms operating in Vietnam use Chinese inputs in production [10], [53]. For instance, according to the Vietnam Association of Seafood Exporters and Producers, China imported over $133 million worth of Vietnamese pangasius in just one month—a 41% year-on-year increase. While Vietnamese firms primarily sell unprocessed fish, Chinese buyers add value through processing and re-export these goods to higher-paying markets such as the US and Europe [21], [55].
So far, Vietnam’s import-export performance hasn’t been heavily impacted, as long as the US refrains from expanding tariffs on Chinese exports. However, in order to preserve this trade balance and promote sustained growth, Vietnam must strengthen its global competitiveness. This includes deploying trade defense tools to shield local industries from cheap Chinese imports, which sometimes enter disguised under Vietnamese origin labels [22], [57]. If the trade standoff continues or worsens—either bilaterally or through broader involvement—investment flows and production capacity could stall worldwide. Such stagnation could trigger a global recession. Vietnam, though initially shielded, would eventually face downward pressure on exports and economic output [25], [43]. Still, in the short run, Vietnam may not experience immediate setbacks. But if the US continues expanding its list of sanctioned Chinese goods, Vietnam’s reliance on input components exported to China will ultimately expose it to longer-term economic disruptions.
5.Policy Recommendations and Strategic Responses
To navigate the growing uncertainties in global trade, especially under escalating geopolitical tensions, Vietnam must implement strategic policy measures across various dimensions.
- Exchange Rate and Inflation Control:
Given the volatility in currency markets—especially with expectations of further depreciation in the Chinese renminbi—it is critical for Vietnam to adopt proactive monetary strategies. Efforts must be made to stabilize the exchange rate while monitoring inflation. Although falling global import prices might ease external inflationary pressures, it is essential to prevent opportunistic price hikes on domestic essentials, which would disproportionately impact vulnerable groups like farmers. - Trade Balance Management:
Vietnam must explore ways to diversify import sources and improve trade performance to minimize deficits and avoid unnecessary trade friction. Proactive dialogue with trading partners, especially the US, on sensitive topics such as trade imbalances, currency reserves, and exchange rates is essential to stay off any “currency manipulation watchlists” [37]. - Attracting High-Quality Foreign Investment:
To prepare for a potential shift in global manufacturing away from China, Vietnam should bolster its readiness to host new investments—particularly in support industries. Infrastructure upgrades, especially in logistics, are crucial to reduce operational and transportation expenses and improve overall competitiveness. - Supply Chain Optimization:
There is a timely opportunity to restructure domestic supply networks to enhance value-added exports. While Vietnam may enjoy short-term investment and trade gains from the trade dispute, long-term success hinges on strengthening the internal supply chain and leveraging existing free trade agreements to uplift the position of Vietnamese businesses within global value chains [29]. - Strengthening Environmental Oversight:
An influx of investment can strain environmental and regulatory systems. Therefore, Vietnam should refine its environmental policies to improve the monitoring and accountability of foreign direct investments. These measures are vital in guiding FDI toward sustainable practices, especially in light of international trade obligations under FTAs [46]. - Diplomatic and Trade Balance:
Vietnam should adopt a neutral and calculated foreign policy approach. Avoiding alignment with any one power bloc, especially amid great power competition, will enable balanced engagement with both the US and China. Coordinated economic strategies and diversified partnerships are essential to maintain national interests [50]. - Trade Monitoring and Risk Management:
It is important to track trading patterns to detect early signs of trade disputes, circumvention cases, or legal challenges. Businesses must be informed and prepared to face potential trade remedy investigations. Authorities should also scrutinize cooperation agreements with foreign firms—especially Chinese ones—to avoid mislabeling of origin, tax evasion, and practices that could trigger trade penalties [13], [55]. - Vigilance in FDI Screening:
Projects showing irregularities or signs of origin fraud must be carefully vetted to prevent misuse of Vietnam as a transshipment route. A long-term strategy should include rethinking FDI attraction—focusing on technology-rich nations and industries shifting production bases. At the same time, Vietnam should introduce technical and regulatory barriers related to environment, defense, and safety to deter low-quality capital inflows [11], [35]. - Domestic Market Utilization:
With a population nearing 100 million, Vietnam holds significant domestic market potential. This should be promoted as a key driver of growth and as an incentive for international partners to invest. - Sustaining Export Markets:
Ongoing efforts are needed to safeguard Vietnam’s export presence in key sectors like steel, seafood, and aluminum. Facing US restrictions, Vietnam must tread carefully to avoid compromising economic independence. Maintaining a position of “economic neutrality” remains the most prudent course [48]. - Advancing Multilateral Economic Relations:
While joining the CPTPP is a substantial achievement, Vietnam should explore additional regional and global markets. Care must be taken to avoid becoming overly dependent on any single economy or bloc, and instead foster a balanced global trade ecosystem [16], [43]. - Scenario Planning and Economic Safeguards:
Vietnam must be ready with contingency plans to deal with potential global economic downturns, ensuring sustainable growth even under adverse conditions. - Preventing Trade Diversion Misuse:
There is growing concern over foreign goods being rerouted through Vietnam to evade high tariffs in destination markets. Authorities must enforce strict checks to prevent such illicit practices and protect the country from reputational and legal risks. - Leveraging Technology and Innovation:
Deploying digital tools—including AI, automation, and smart analytics—can enhance supply chain operations and transparency across trade-related activities. - Proactive Risk Forecasting:
Given global uncertainties—ranging from geopolitical unrest to pandemics and climate events—it is critical to develop advanced forecasting systems to detect, analyze, and respond to external shocks [30].
6.Summary, Constraints, and Future Directions
The global COVID-19 pandemic significantly disrupted cross-border commerce and investment flows. Widespread lockdowns, closed factories, restricted transportation, and suspended air travel caused production stoppages, leaving millions without work across interconnected supply chains. This revealed the vulnerabilities of heavy reliance on China as the central manufacturing hub for global operations. When China shut down its economy to control the virus, the shockwaves rippled across the international value chain, halting business activities and causing job losses globally. As a result, international corporations are now reconsidering their supply chain strategies. Many are relocating segments of their production to diversify risk. For example, American firms are increasingly looking to Mexico and India as alternative production bases, while European businesses are considering shifting to parts of Africa and the Middle East. Japanese and South Korean companies are examining Southeast Asia as a viable region for production expansion. Even Chinese firms are seeking to globalize their operations to reduce dependency on the domestic landscape.
The intensification of retaliatory tariffs between the United States and China has dramatically escalated bilateral tensions. Despite the signing of a “Phase One” trade agreement in January 2020, which required China to purchase $200 billion in American goods such as agricultural products, technology, and industrial equipment, many structural issues remain unresolved. These include Beijing’s subsidies to domestic industries and its overarching control of the economic system—factors that continue to fuel US opposition. Notably, the agreement kept most of the Trump-era tariffs intact, especially those on approximately $360 billion worth of Chinese exports. This suggests that the path to a “Phase Two” deal remains uncertain, likely postponed until after the conclusion of the 2020 US presidential elections. Economic assessments by organizations like Capital Economics suggest that China bore the brunt of the economic fallout from this conflict. Given its heavy reliance on international trade, particularly with the US, the disruption had a more profound impact on its GDP than it did on the American economy. While US exports to China constitute less than 1% of US GDP, China’s exports to the US account for nearly 4% of its GDP and about 20% of its overall export volume.
Moreover, the US economy remained relatively strong during the escalation, whereas China showed signs of slowing growth after years of rapid expansion. Fundamentally, the US-China trade dispute represents a broader struggle between an established superpower and an emerging one, each vying for economic and technological dominance. The US aims to curtail China’s growing influence across key sectors, reduce its trade imbalance, combat intellectual property theft, and maintain its technological leadership. These ambitions are closely tied to broader geopolitical strategies, particularly the shift from strategic patience to active containment. Simultaneously, the acceleration of the Fourth Industrial Revolution, catalyzed by COVID-19, is reshaping global business models and communication systems. At the microeconomic level, corporate operations are being digitized, while macroeconomic policies are being recalibrated to accommodate these technological shifts. Digital transformation is no longer optional—it’s a necessity.
While globalization will continue, it will increasingly collide with national protectionist sentiments. International trade organizations and multilateral systems may face pressure to reform in response to new global dynamics. The competition for global influence is becoming more fragmented, with initiatives such as the US’s Indo-Pacific Strategy (IPS) directly clashing with China’s Belt and Road Initiative (BRI). Moreover, growing concerns around water availability, food security, and cybersecurity are likely to define the future of non-traditional security challenges, adding complexity to an already unstable global landscape. Amid this, ASEAN remains a pivotal region, providing momentum for continued growth in East Asia. Subregions like the Mekong basin, which includes Vietnam, are poised to gain strategic significance, attracting more regional and global interest. Simultaneously, demographic shifts, climate change, and rapid urbanization will increasingly influence national and regional policy agendas.
The long-term recovery of the global economy will depend on how quickly nations and businesses adapt to these shifting paradigms and how effectively new economic models—such as digital commerce and e-services—can fill the gaps left by traditional industries. Vietnam, although not directly involved in the US-China power struggle, can still benefit in the near term by absorbing diverted trade and investment flows. However, sustainable growth will depend on product quality, innovation, and resilience. It is important for Vietnam to remain vigilant. Not being a primary actor in this trade conflict does not insulate the country from secondary impacts, particularly from potential scrutiny by US trade regulators. Therefore, policymakers must implement robust contingency measures to insulate the domestic economy and navigate Vietnam through what could become an extended period of global turbulence.
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