Why Has the US-China Trade War Restarted and How Have Markets Reacted?

Advanced | October 19, 2025

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US-China Trade War Restarted: The Background

In early October 2025, the People’s Republic of China announced fresh restrictions on the export of rare-earth minerals—critical inputs for electric vehicles, defence systems, and semiconductors—citing national-security concerns. (theguardian.com) In response, U.S. President Donald Trump threatened 100 % tariffs on Chinese imports, triggering a new front in the long-running trade war. This dramatic move set the stage for what analysts now call the US-China trade war restarted, reviving the tensions that defined global trade over the past decade. (reuters.com)

How the US-China Trade War Restarted is Shaking Markets

The US-China trade war restarted with a bang. Stock indexes in China slid sharply — the CSI 300 fell 1.8 %, the Shanghai Composite 1.3 %, and Hong Kong’s Hang Seng plunged 3.5 % — as export-control and tariff threats converged. (reuters.com) U.S. markets also wobbled, with a sharp sell-off in tech and trade-sensitive stocks before rebounding when Trump hinted at negotiations. (ft.com) The result was a surge in volatility, reflecting deep uncertainty about how long the renewed conflict would last.

Business and Supply Chain Impact of the US-China Trade War Restarted

With the US-China trade war restarted, companies are scrambling to re-evaluate sourcing and supply-chain strategies. Firms relying heavily on Chinese manufacturing or rare-earth components face higher costs and unpredictable delays. Investors are retreating toward safe-haven assets like gold, which surged to record highs as volatility spiked. (moneyweek.com) Meanwhile, sectors such as AI, defence, and energy storage are seeing short-term gains as global buyers search for non-Chinese alternatives. This turbulence shows how intertwined trade, technology, and geopolitics remain in today’s global economy. (reuters.com)

What Happens Next

The coming weeks will determine whether the United States enforces its 100 % tariffs or finds room for a diplomatic truce. Much depends on how Beijing responds — whether it escalates with additional export controls or adopts a softer approach to stabilise markets. As investors hedge against the risk of further escalation, economists warn that prolonged tension could reshape the global trade map. Countries in Southeast Asia and Latin America may benefit from new investment flows, while others risk collateral damage as supply chains shift away from China. The US-China trade war restarted is not just a political story — it’s a defining moment for businesses and economies worldwide.

Vocabulary

escalate (verb) – to increase or intensify.
Example: “The tariff threat escalated the trade war overnight.”
rebound (verb) – to recover after a fall.
Example: “Markets rebounded when the president softened his tone.”
supply-chain (noun) – the sequence of processes involved in the production and distribution of a commodity.
Example: “Disruptions in China’s rare-earth exports rattled the supply-chain for EV batteries.”
safe-haven (noun) – an investment expected to hold or increase value during market turbulence.
Example: “Gold proved a safe-haven asset during the renewed trade conflict.”
tech-heavy (adjective) – dominated by technology-oriented companies.
Example: “The Nasdaq, which is tech-heavy, fell sharply amid the tensions.”
tariff (noun) – a tax on imports or exports between sovereign states.
Example: “The U.S. threatened a 100 % tariff on Chinese goods.”
export-control (noun) – government restriction of goods or services leaving a country.
Example: “China’s export-control on rare-earths triggered a sharp market response.”
re-route (verb) – to change the path of something (transport, supply, etc.).
Example: “Manufacturers began to re-route production away from China to mitigate risk.”
re-evaluate (verb) – to assess again, often due to changed conditions.
Example: “Companies must re-evaluate their dependencies after the trade war restarted.”
volatility (noun) – the degree of variation of a trading price series over time.
Example: “Market volatility spiked when the trade conflict flared up.”

Discussion Questions (About the Article)

What triggered the situation where the US-China trade war restarted?
How did markets react when the tensions first emerged?
Why are rare-earths playing a central role in this latest escalation?
In what ways might businesses adjust their strategies after the trade war restarted?
What signals would suggest the situation is calming rather than escalating further?

Discussion Questions (Broader Topic)

How important is diversification of supply-chains when major countries wield export-controls?
Are tariffs or export-controls more damaging to global trade and why?
How should investors prepare for geopolitical risk affecting markets?
Could the US-China trade war have spill-over effects on third-country economies?
What role can diplomacy play in preventing the trade war from restarting entirely?

Related Idiom

“Walking on eggshells” – acting very carefully because a situation is delicate.
Example: “With the US-China trade war restarted, companies are walking on eggshells before setting long-term contracts.”

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This article was inspired by: The Guardian (“Why has US-China trade war restarted and how have markets reacted?”, Oct 13, 2025) (theguardian.com)