Many economists believe tariffs increase prices for consumers and reduce economic output. Others say they spur companies to reshoring, moving production to countries where labor is cheaper or taxes are lower. Regardless of the effect on jobs, the higher costs imposed by tariffs can make global trade less attractive and prompt businesses to cut back on investment.
A full-blown trade war would be painful for both sides. For the US, a loss of access to China’s consumer market could cost billions in lost sales revenue and put thousands of jobs at risk. The country’s industrial sector relying on imports would be hit hardest, especially those producing high-end consumer electronics and appliances.
China’s economic growth depends on access to international markets and technology. Beijing sees US export controls and tariffs as an attempt to contain the country’s rise and stunt its technological development. Its leaders view the second round of US-China trade tensions primarily through a political lens rather than an economic one and are committed to continuing to push back on US pressure.
The two countries stepped away from the brink of a trade embargo with a Geneva deal in May, and President Trump signaled that he wants to deescalate the conflict. But if the tariffs remain in place, there is a real risk of a global economic slowdown that could cause a recession in the United States. That could hurt demand for American goods and services, which could push stocks down, especially those in cyclical sectors that are highly dependent on global trade.