Negative Impact of US-China Tariff War Deepens

As expected, June 2025 was another devastating month for trade between the U.S. and China.

The high tariffs U.S. President Donald Trump and China’s Communist Party General Chairman Xi Jinping have imposed on each other’s goods since President Trump initiated them on the 2 April 2025 “Liberation Day” event ensured that outcome. The combined value of goods exchanged between the U.S. and China totaled $28.4 billion in June 2025, which was slightly up from the $27.0 billion figure recorded in May. June 2025′s combined trade is 37.5% below the equivalent figure reported a year earlier for June 2024.

U.S. exports to China rebounded from May 2025′s dismal level to fall by just 16.6% year-over-year, while China’s exports to the U.S. plummeted by 44.5%.

That doesn’t take the seasonal variation of trade between the two countries into account. The following chart presents the monthly figures for the combined value of goods exchanged between the U.S. and China along with the trailing twelve month average, which smooths out the year-to-year variation in the trade data.

The chart also features a counterfactual projection illustrating what the trailing year average would look like had the new tariff war between the U.S. and China not taken place. In the three months since it erupted, we find the actual trajectory of U.S.-China trade is 9.0% below the levels it would reasonably have been expected to be without it. In the absence of trade deals, this difference will continue growing while older data in the rolling average falls off and is replaced by newer, lower trade data.

Next month’s data may see the trade figures perk up because of the deal struck between the U.S. and China at the end of June 2025 for rare earth materials. In the absence of a larger deal to significantly lower the tariffs both nations have imposed to date however, we anticipate the trend will continue downward. There are signals Xi and Trump will meet to finalize a deal, but at this writing, no deal has yet been reached.

We do have growing evidence of the extent to which 2025′s U.S.-China tariff war is negatively impacting China’s economy, which we’ll cover in the very near future.

References

U.S. Census Bureau. U.S. International Trade in Goods and Services (FT900). U.S. Trade in Goods with China, Not Seasonally Adjusted, Nominal Figures, Total Census Basis. [Online database]. Accessed 5 August 2025.

Image credit: U.S. President Donald Trump alongside General Secretary of the Chinese Communist Party Xi Jinping on 8 November 2017 by Shealah Craighead on Flickr. Creative Commons Public Domain Mark 1.0 Universal Deed.