Trade War Monitor, Oct. 20: The Trade War Thaw Flash-Freezes

The once-improving U.S.-China trade relationship experienced a dramatic reversal in the lead-up to the APEC summit in South Korea, returning to confrontation after a period of cautious engagement. The scope of the rivalry has expanded beyond negotiations to impact global shipping, advanced technology sectors, and manufacturing, transforming the economic landscape between the two nations. Global supply chains are now subject to new volatility, as each side escalates measures and retaliatory actions ripple across multiple industries[para. 1].

The immediate effects of this renewed economic rivalry are evident in the shipping industry. Anticipation of new tariffs by the Trump administration has led exporters to rapidly ship goods ahead of potential fees, resulting in a sharp increase in freight rates. According to the Shanghai Containerized Freight Index (SCFI), rates surged by 12.9% in the week of October 17, with container prices on the Pacific route soaring by 32% to $1,936 per 40-foot equivalent unit (FEU). Despite this short-term surge, the underlying instability is causing concern among industry observers, as the volatility conceals deeper, long-lasting disruption to supply chains[para. 2][para. 5][para. 6][para. 7].

U.S. tariffs have had a substantial negative impact on China's shipbuilding industry. In the first nine months of 2025, new orders at Chinese shipyards dropped by 23.5%, totaling 66.6 million deadweight tons (DWT), as reported by the China Association of the National Shipbuilding Industry. The Section 301 tariffs specifically targeting large container ships have contributed to this steep decline, weakening a sector where China holds global leadership[para. 10][para. 11][para. 12].

Amidst these challenges, China’s "new three" high-tech exports — lithium-ion batteries, solar cells, and electric vehicles (EVs) — have surged, providing a major boost to the country’s overall export performance. In September, exports of these products increased by 39.6% year-on-year to $16.5 billion, reaching a cumulative value of $126.9 billion for the first nine months of the year, a 19.1% rise. This growth helped offset slumps in other areas and pushed China's total export growth to 8.3% last month, outperforming market expectations[para. 14][para. 15][para. 16].

In contrast, U.S. export controls have devastated the China market for Nvidia’s artificial intelligence chips. The company’s market share in China has plummeted from 95% to zero, as stated by CEO Jensen Huang, who argued that this exclusion not only harms China but may also have negative consequences for the U.S. He emphasized the strategic disadvantage of barring Chinese researchers from using U.S. technology, underscoring broader concerns about the policy’s long-term effects[para. 18][para. 19][para. 20][para. 21].

The escalation is not limited to tariffs and tech bans; Washington has expanded its Entity List to target subsidiaries of blacklisted Chinese firms, a move affecting hundreds of companies globally. These developments signal a deeper, more entrenched phase of confrontation, likely to overshadow the APEC summit and disturb the Asia-Pacific regional economic outlook. The repeated use of unilateral U.S. measures revives anxieties reminiscent of the 2017-2021 Trump era[para. 24][para. 25][para. 26][para. 28][para. 30].

Analysts note that the competition is now targeting highly strategic sectors such as integrated circuits, industrial software, and advanced materials. The U.S. is seeking to constrain China's progress in mid-to-high-end manufacturing, while China retaliates in vital resources like agricultural goods, rare earths, and lithium batteries. Volatility in these sectors is expected to increase as each side sharpens its focus. Investors are advised to watch for opportunities in domestic substitution in China, market diversification strategies, and potential price spikes in areas subject to export controls[para. 31][para. 32].

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