Assessing the Impact of Trump's Tariff Threats on U.S.-China Trade Relations

The U.S.-China trade relationship has entered a volatile phase under President Donald Trump's 2025 administration, marked by a sharp escalation in tariff threats and retaliatory measures. With a 100% additional tariff on Chinese imports announced for November 1, 2025, and reciprocal export controls on critical software, the trade war has reignited concerns over global supply chain disruptions and economic fallout. This analysis examines the investment risks and sectoral exposures arising from these developments, drawing on recent policy shifts, market reactions, and sector-specific vulnerabilities.

The Escalation of Tariff Policies: A New Phase in the Trade War

President Trump's October 2025 announcement of a 100% tariff on Chinese imports-on top of an existing 55% rate-represents a dramatic escalation. The 55% baseline includes a 10% reciprocal tariff, a 20% "fentanyl" tariff, and the original 25% Section 301 tariffs from Trump's first term, according to China Briefing's tariff breakdown. This new measure, framed as retaliation for China's rare-earth mineral export controls, threatens to push total tariffs toward 155%, according to a CNBC report. The timing is critical: the previous 90-day tariff truce, extended in August 2025, expires on November 10, creating a window for further escalation, according to the tariff tracker.

The economic stakes are high. According to the Yale model, the 2025 tariffs could trim U.S. real GDP growth by 0.5 percentage points annually through 2026, while the average American household could face $4,600 in additional annual costs, figures reported by Chain Store Guide. These figures underscore the systemic risks of prolonged trade tensions, particularly for sectors reliant on cross-border trade.

Sectoral Exposure: Winners, Losers, and Strategic Shifts

1. Technology and Semiconductors: A Double-Edged Sword
The technology sector faces dual pressures. U.S. semiconductor firms like Intel, which depend on China as their largest market, risk revenue declines due to tariffs and export restrictions, according to a KI Wealth analysis. Meanwhile, companies with diversified supply chains, such as NVIDIA (which produces AI chips in Taiwan), are less vulnerable, the KI Wealth analysis noted. The sector's gross margins have already contracted, with 32% of firms reporting declines of 1–5% and 22% noting drops of 6–10%, according to a Forbes article.

2. Manufacturing and Retail: Cost Inflation and Supply Chain Reconfiguration
Manufacturing firms are grappling with rising input costs and legal uncertainties. Over half of U.S. manufacturers have delayed capital investments for up to a year due to tariff-related volatility, according to the Deloitte outlook. Retailers, meanwhile, are navigating a paradox: the temporary tariff truce has pushed them to revert to Chinese suppliers, straining Indian manufacturers who had previously gained orders, according to a Forbes piece. Inventory levels have risen by 10–15% as retailers hedge against uncertainty, while private-label strategies are being adopted to mitigate price pressures.

3. Agriculture and Aviation: Long-Standing Vulnerabilities
The agricultural sector, already hit by prior tariffs, faces renewed challenges. A 44% tariff on U.S. farm equipment exports has hurt firms like Caterpillar and Deere & Co., while Chinese demand for soybeans and pork remains subdued, according to an Invezz analysis. Similarly, Boeing's competitiveness has eroded due to a 34% tariff on U.S. goods, forcing it to cede market share to Airbus and COMAC, as Invezz noted.

4. Defensive Sectors: Utilities and Healthcare as Safe Havens
Defensive sectors like utilities and healthcare are emerging as relative safe havens. With low exposure to international trade, these sectors are expected to outperform in a prolonged tariff regime, according to the Morgan Stanley guide. Similarly, software and cybersecurity firms, less reliant on physical imports, are gaining traction amid AI-driven demand, the Morgan Stanley guide observed.

Market Reactions and Investment Strategies

The April 2025 tariff announcement triggered one of the sharpest stock market declines in decades, with the S&P 500 dropping 11% over two days, according to an FRBSF economic letter. Energy and financial sectors bore the brunt, with CDS spreads widening to reflect heightened default risks, the economic letter found. Conversely, sectors like telecommunications and consumer discretionary showed resilience, the letter noted, suggesting investor bets on long-term adaptability.

For investors, diversification is key. Morgan Stanley recommends overweighting defensive sectors and hedging with gold, commodities, and inflation-protected bonds, as discussed in a Davron piece. Meanwhile, reshoring trends in steel and aluminum production-benefiting firms like Nucor and Cleveland-Cliffs-highlight the potential for sector-specific gains, supported by a CNBC survey.

Conclusion: Navigating a Fractured Trade Landscape

The Trump administration's tariff policies have created a fragmented and unpredictable trade environment. While certain sectors-particularly those with domestic production capabilities-stand to benefit, others face margin compression, supply chain disruptions, and reputational risks. Investors must balance short-term volatility with long-term strategic shifts, such as supply chain diversification and sector rotation. As the November 10 truce expiration looms, the coming weeks will be critical in determining whether this phase of the trade war escalates further or stabilizes into a new equilibrium.