US Treasury Secretary Says US-China Trade War Will Not Last — Is the Market Turning Bullish?

Since 2018, the US-China trade war has been a major driver of global economic uncertainty. The conflict intensified sharply in early 2025, with tit-for-tat tariff hikes between the world’s two largest economies. The United States has imposed steep tariffs on Chinese imports, while China has retaliated with its own measures—shaking up trade flows and rattling financial markets. But there may be a glimmer of hope. 

US Treasury Secretary Janet Yellen recently indicated that the current tariff war is not sustainable, sparking speculation about whether a resolution—and a potential market rebound—could be on the horizon.

How the US-China Trade War Escalated

What began with modest tariffs has snowballed into one of the most aggressive trade conflicts in recent history. As of April 2025, average US tariffs on Chinese goods have skyrocketed to around 124.1%—a staggering increase from pre-war levels. 

The Trump administration has enforced sweeping tariff hikes, including a flat 20% on all Chinese imports and a sharp 125% on specific categories, alongside additional levies tied to border and security concerns.

In response, China has fought back hard. Retaliatory tariffs on American products now reach up to 125%, hitting key exports like liquefied natural gas, coal, and agricultural goods. In some instances, the cumulative effect has driven total duties on Chinese goods to as high as 145%, putting tremendous strain on global supply chains.

The Economic Fallout for the US, China, and Beyond

The financial toll of this tariff battle is undeniable. Analysts estimate that US GDP could shrink by around 0.8% due to American-imposed tariffs, while China's countermeasures could cost the US another 0.2%. Altogether, the trade war may reduce US GDP by a full percentage point.

China, too, is feeling the pressure. Its currency, the yuan, has weakened against the dollar, and stock indices like the Hang Seng have slipped into bear territory. On a global scale, the conflict has disrupted supply chains and added tension to the international trading system. Economists warn that a prolonged standoff could lead to a “hard decoupling,” with the US and China scaling back trade and investment ties—potentially destabilizing the global economy.

China's Strategic Position and the US Response

China isn’t just reacting—it’s playing its cards strategically. It controls a vast portion of the global supply of rare earth elements, essential for tech and green energy industries. It also holds more than $770 billion in US Treasury bonds and manages its currency tightly, giving it significant leverage.

Despite these strengths, China is also taking risks. Using these tools too aggressively could backfire, damaging its own economic interests and straining relationships with other trade partners. Still, Beijing has remained firm, escalating tariffs and dismissing US actions as economically misguided.

Meanwhile, the US has extended its tariff campaign to other countries as well—but China has borne the brunt of the measures.

What’s Next: Is the Trade War Ending?

Treasury Secretary Yellen’s recent comments that the trade war is “not sustainable” hint at a potential shift in tone. However, there’s still little concrete evidence of de-escalation. Tariffs continue to rise, and formal negotiations remain stalled.

Investors are split. Some are bracing for more volatility, while others are cautiously optimistic that diplomacy will eventually prevail. If talks resume and tariffs start to come down, it could spark renewed confidence in the markets.

Conclusion

The US-China trade war has pushed tariffs to historic highs and rattled economies worldwide. Although signs suggest both sides are feeling the strain, there's still no clear path to resolution. The longer this standoff continues, the greater the risk to global trade and financial stability. Ultimately, the interconnected nature of the US and Chinese economies may force both countries to the negotiating table—whether sooner or later.

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FAQ

What triggered the latest escalation in US-China tariffs?
The US introduced fresh tariffs in early 2025—some rising as high as 125%—citing ongoing concerns over China’s trade practices.

How high are US tariffs on Chinese imports now?
Combined tariff layers have pushed US duties on Chinese goods to as much as 145%.

How is China responding to these tariffs?
China has imposed tariffs of up to 125% on US goods and is leveraging tools like currency control and rare earth dominance to counter US pressure.

What’s the global impact of this trade war?
It's triggered volatility across financial markets, weakened currencies, and disrupted supply chains across sectors.

Is there hope for a resolution soon?
While the US Treasury Secretary has suggested the conflict can’t last forever, rising tariffs and lack of progress in negotiations point to a prolonged dispute—for now.