Zarmina Khan
Protectionism refers to economic policies and strategies enacted by a government to restrict international trade and protect domestic industries from foreign competition. These policies often include tariffs (taxes on imports), import quotas (restrictions on the number of certain goods that can be imported), subsidies to local industries and regulations or standards that favor domestic over foreign producers. Advocates of protectionism argue that it can help safeguard jobs, protect emerging industries, and reduce trade deficits.
In 2025, the USA under President Donald Trump has intensified its protectionist stance as part of a broader economic initiative labelled as “America First.” It has focused on different protectionist measures like Donald Trump announced a Universal Import Tariff (10%), as part of a national emergency declaration on April 2, 2025. The USA has imposed Custom tariffs on about 60 countries, including China, to balance unfair trade practices. Among the most impactful measures is the increase in tariffs on metals, with aluminum tariffs rising from 10% to 25%. These moves specifically target China’s state-subsidized industrial output, while aiming to revive domestic US production, particularly in the steel and aluminum sectors. Furthermore, the US has introduced new maritime trade rules, charging up to $3.5 million per docking for ships built in China. This measure is designed to deter the use of Chinese-built vessels, promote American shipbuilding, and push back against China’s growing dominance in global maritime trade.
In response, China has enacted several counter measures e.g. on March 4, 2025, China announced retaliatory tariffs on US agricultural exports. China imposed 15% Tariff on chicken, wheat, corn, and cotton. Moreover, China imposed 10% tariff on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products. China has intensified restrictions on the export of seven critical rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These elements are vital for high-tech industries, including electric vehicles and wind turbines. While China’s control over processing these heavy rare earths is significant, the impact of its export restrictions has been limited due to workarounds, such as rerouting trade through intermediary countries like Belgium. Furthermore, technological innovations, like Tesla’s reduction of rare earth use, offer potential long-term solutions.
China has launched an anti-monopoly investigation into USA firms operating within its borders, including DuPont China and Google. This action signals broader economic tensions and reflects China’s scrutiny of foreign companies’ market practices. The investigations are part of China’s broader strategy to ensure fair competition and protect domestic industries. On April 11, 2025, China raised tariffs on all US imports from 84% to 125%, escalating the trade conflict further. This significant increase in tariffs is a direct response to the US’s trade policies and reflects the intensifying economic tensions between the two nations.
Protectionist trade policies in the US come with both benefits and drawbacks. On the positive side, they can boost domestic industries like steel, shipbuilding, and manufacturing by making imported goods more expensive, thereby encouraging demand for US-made products. These policies may also lead to the reshoring of jobs, as companies move operations back to the US to avoid tariffs, which in turn can stimulate local economies. Additionally, tariffs generate direct revenue for the government and can strengthen national security by reducing dependence on foreign supply chains in critical sectors. However, these policies also have negative consequences. They tend to raise costs for consumers and businesses, especially those dependent on imported goods. Retaliatory tariffs from other countries can upset American exporters, such as farmers and tech firms, while disruptions in global supply chains can lead to inadequacies and delays. Moreover, the increased costs associated with tariffs may contribute to inflation. Ultimately, while protectionism can support certain sectors, it must be carefully managed to avoid broader economic drawbacks.
China’s use of protectionist trade policies also yields a mix of benefits and challenges. On the positive side, such measures help shield key domestic industries like rare earth mining, technology, and agriculture from foreign competition, allowing these sectors to strengthen and maintain a dominant global position. By levying tariffs on US goods and launching investigations into foreign companies, China aims to strengthen its domestic industries and tighten its control over the national economy. Export restrictions on critical resources, such as rare earth elements, can also serve as powerful geopolitical tools, enhancing China’s strategic leverage in global supply chains. Furthermore, protectionist policies may encourage domestic innovation and self-reliance, particularly in areas like semiconductors and artificial intelligence. However, the drawback is noteworthy. Retaliatory trade actions and higher import costs can strain Chinese businesses that rely on foreign components or markets, especially in manufacturing and high-tech industries. Global investors may see increased risk, leading to reduced foreign direct investment and slower capital inflows. Additionally, these policies can contribute to diplomatic tensions, economic isolation, and potential declines in export demand if trade partners shift to alternative suppliers. While protectionism can reinforce China’s economic resilience and sovereignty, it also risks long-term repercussions in an increasingly interconnected global economy.
The ongoing trade war between the US and China in 2025, marked by high tariffs, trade barriers, and retaliatory actions, has significantly disrupted the global economic landscape. The consequences extend beyond the two countries, affecting supply chains, trade flows, and market confidence worldwide.
The International Monetary Fund (IMF) has significantly reduced its US economic growth forecast for 2025, dropping it from 2.7% to 1.8%. This revision is attributed to escalating trade tensions, particularly following the implementation of tariffs by the USA administration. The IMF also raised its inflation expectations to around 3% for the same period. Venture capitalists have raised alarms about the adverse effects of new tariffs on hardware startups. The obligation of a 145% tariff on Chinese goods has led to market uncertainty, prompting investors to extend investment cycles and delay initial public offerings (IPOs).
The US is considering imposing fees ranging from $500,000 to $1.5 million per port call on Chinese-built ships. With China accounting for about 60% of the global shipbuilding order book, this proposal could significantly increase shipping costs and disrupt trade flows. Companies are already rethinking their port stops, adjusting their fleets, and changing up their trade routes to prepare for these possible changes.
Trade between the US and China has taken a sharp turn toward protectionism, with both sides putting up barriers to protect their own economies. The US is trying to bring jobs back and boost industries like steel and manufacturing, while China is focused on strengthening its own tech and resource sectors. These moves can help local businesses and raise government revenue, but they also come with downsides, like higher prices, supply chain issues, and rising tensions between the two countries.
The writer is Research Associate at School for Law and Development
