Global Economic Consequences of the US–China Trade War: Macroeconomic Fragmentation, Supply Chain Reconfiguration, and Geoeconomic Rivalry

Abstract

This article reviews the systemic effects of the US-China trade war beyond the bilateral tariff, not only focusing on macroeconomic, trade and supply chain aspects, but also geoeconomic aspects. The conflict has lowered estimated global GDP growth to 2.8 3.0% (2025 2026) and dampened growth in global trade to an estimated 1.8% in 2025. Tariffs have caused cost push inflation, such as in the United States, while China continues to diversify exports and improve its industry, achieving a record trade surplus (≈$992 billion in 2024). Global value chains have experienced a significant reshaping, as companies have shifted to “friend shoring,” “nearshoring” and diversification strategies, and part of the “collateral shift” of trade away from US China to regional value chains. The impact of trade diversion for countries in Southeast Asia (Vietnam, Malaysia) and the tightening of rules of origin by the USA for them, the nearshoring hub of Mexico under political pressure, and the opportunities and structural constraints for Central Asian economies such as Uzbekistan are heterogeneous. The article also discusses geoeconomic aspects: semiconductors have established a hierarchical governance framework of the global technology industry that excludes China, and China has spent more than $150 billion on building parallel technology chains. At the same time, China has weaponized its monopoly over rare earth elements (RREEs) a dominance it holds due to its 91% share of the refining market – and has recently implemented export licensing measures in 2025 that leave target countries, particularly in advanced economies, exposed to China's advanced technologies and green and digital transitions. The results reveal that the trade conflict is not just a bilateral conflict, but one that is contributing to economic fragmentation across the globe.