MCTM MUN 2025
TABLE OF CONTENTS
Topic Page No.
Letter from the Executive Board 2
Introduction 3
Timeline 4
Global Economic Impacts 4
(i) Global Supply Chains
Global Economic Impacts 5
(ii) Inflation
Global Economic Impacts 6
(iii)Recession Risks
Global Economic Impacts 7
(iv)Social Unrest
Major Country Perspectives 8
Bibliography 10
Letter from the Executive Board:
It gives us immense pleasure to serve on the Executive Board of the World Economic
Forum at MCTM MUN.
The World Economic Forum (WEF) is a special international organization in which
government leaders, business leaders, scholars, and civil society leaders work together to
set global, regional, and industry agendas. Economic uncertainty and geo-political
tensions increasingly define our global landscape. The WEF plays an essential role in
addressing these issues through inclusive economic growth, public-private cooperation,
and innovative policymaking.
This year, the committee will grapple with some of the most pressing economic problems
facing society, including disruptions to trade, inflationary forces, threats of recession, and
episodes of social turmoil. The delegates will be asked not only to understand the
complex interdependencies of the world's economies but also to propose creative and
cooperative solutions that consider the perspectives of diverse stakeholders.
The spirit of the World Economic Forum requires careful negotiation, a spirit of
collaboration, and a commitment to fair progress. Members need to consider both
macroeconomic implications and the impacts on people that occur as a result of each
policy decision, as they all seek to formulate sustainable answers to global turmoil.
This Background Guide is the basis for your research and preparation work. But it is not
definitive in scope. Delegates are invited to project their inquiry beyond that contained
herein examining national positions, grappling with empirical evidence, and challenging
the conference with intellectual curiosity and strategic imagination.
Warm regards,
Aarav Navlakha (Chairperson)
Purva Shah (Vice–Chairperson)
Kavin Seyon (Moderator)
World Economic Forum
Introduction
Agenda: Mitigating Global Economic Disruptions; Addressing Supply Chain Chaos,
Inflationary Pressures, Recession Risks, and Social Unrest from the USA-China Tariff
War
The US–China tariff war – a tit‐for‐tat cycle of import duties between the world’s two
largest economies – has emerged as a major global stress point. Since 2018, U.S. and
Chinese tariffs have reset a decades‐long trend of liberalized trade, disrupting supply
chains and raising costs worldwide. Tariffs now apply to nearly all bilateral trade: by
mid‐2025 U.S. duties on Chinese imports averaged over 50% (covering 100% of goods),
while China’s duties on U.S. exports averaged over 30%..
The trade conflict began in early 2018 under the Trump Administration. In March 2018,
the U.S. imposed 25% tariffs on steel and 10% on aluminum (under Section 232 for
“national security”), immediately prompting Chinese retaliatory duties on U.S. metals.
By mid‐2018, the U.S. invoked Section 301 to apply 10–25% tariffs on successive
tranches of Chinese goods: roughly $50 billion in July 2018, another $50 billion in
August, and a proposed $200 billion in September (later raised to 25% in May 2019).
China responded in kind on comparable volumes of U.S. goods (about $34B and $16B in
mid‐2018, and later on $110B in 2019). Table 1 (below) summarizes key tariff rounds.
By late 2019, U.S. tariffs covered about $550 billion of imports from China, and Chinese
tariffs about $185 billion of U.S. exports
In January 2020, the two sides signed a “Phase One” deal, under which China committed
to some purchases of U.S. goods and modest reforms (on IP and financial access) in
exchange for modest tariff rollbacks. However, most duties stayed in place after 2020.
During 2021–24, the Biden Administration largely maintained Trump‐era tariffs while
adding targeted duties on strategic goods (e.g., a 100% tariff on Chinese electric vehicles,
and higher rates on solar panels, batteries, chip,s and steel) to protect American
industries. Notably, core Trump‐era duties on $370 billion of Chinese imports were
affirmed, with only sector‐specific hikes. In spring 2024, the U.S. finalized these
increases (phased in through 2024–26). China’s official response was more measured
than in 2018, denouncing U.S. “blackmail” and threatening “resolute measures,” but
avoiding extreme counters (no major new tariffs were imposed as of mid‐2025)
Timeline
Date U.S Action China’s response
March 2018 25% steel, 10% aluminum China 15–25% on U.S.
on most imports steel/alum (Apr)
July 2018 25% on ~$50B of Chinese 25% on ~$34B of U.S.
tech/industrial goods imports
August 2018 25% on additional ~$16B 25% on $16B of U.S.
of Chinese goods goods
September 2018 10% on $200B (later raised 5–10% on $60B of U.S.
to 25% in May 2019) imports (Aug 2019)
January 2020 Phase One trade deal Tariff relief on some
signed; some rollback categories
March 2021 Tariff review began (Biden No significant change
took office)
May 2024 Quadruple tariff on Chinese China denounced U.S.
EVs (to 100%); raise on action, limited
steel/alum, batteries, chips, countermeasures
solar
Supply Chain Crisis
The tariff war has strained global supply chains in complex ways. Higher duties have
raised costs for import‐dependent industries and spurred firms to reconfigure supply
networks. Many multinational companies have accelerated a “China + 1” strategy:
shifting production out of China to other low‐cost Asian sites (Vietnam, Malaysia,
Cambodia) or back to North America and Europe. For example, electronic and auto
supply chains are diversifying; U.S. imports from other emerging economies have risen
as firms seek alternatives. Southeast Asian countries report a mixed picture: while some
(Vietnam, Malaysia) have won new investment and expanded exports, others (e.g.
Thailand’s rice and car sectors) face potential U.S. tariffs that threaten competitiveness.
High U.S. duties on products “made in China” have also ensnared regional producers.
Notably, in April 2025 the U.S. announced very steep tariffs (up to 3,521%) on solar
panels imported from four Southeast Asian nations – a move justified as targeting
Chinese manufacturers using Asian plants, but criticized for penalizing ASEAN
exporters. This example underscores the risk of “collateral damage”: high U.S. tariffs on
Chinese-origin goods can inadvertently disrupt trade in regional hubs.
Meanwhile, China has sought to diversify its trade links and build domestic resilience.
State and private firms are forging supply ties with Asia, Africa and Latin America.
Regional trade agreements like RCEP (Asia-Pacific) and the Belt and Road Initiative help
China open new markets and investment channels. Some global firms (e.g. automakers)
have moved assembly lines or sourcing away from China to lower global tariffs.
However, replacing China’s scale and infrastructure is difficult, so relocation is gradual.
Analysts note that new supply chains won’t form overnight, but are indeed “forming”.
World Trade Organization (WTO) economists project that if U.S.-China trade were
seriously “decoupled” (as in dividing the world economy into two blocs), merchandise
trade volumes could fall ~0.2–1.5% in 2025 and North America alone would subtract
roughly 1.7 percentage points from global trade growth. Without a slowdown, global
trade had been forecast to grow modestly; the WTO now expects trade to stagnate or
decline in 2025 amid tariff headwinds.
Overall, tariffs add complexity and cost to cross‑border commerce. As a Federal Reserve
study points out, American firms and consumers indirectly pay these taxes: input tariffs
raise producer costs, which pass through to consumer prices. For the latest U.S. tariff
hikes (Feb–Mar 2025), the Fed finds about 0.3% added to core goods prices and
roughly 0.1 percentage point to overall core inflation. In practical terms, even
moderate duties on widely used inputs (steel, electronics, etc.) can ripple through
manufacturing supply chains, raising final prices and slowing production.
Inflation
Tariffs act like import taxes, so they tend to increase prices of affected goods. Empirical
studies confirm this pass-through: U.S. tariffs in 2018–19 were largely passed into
consumer prices within a few months. In 2025 the incremental tariffs on Chinese imports
have so far had a modest but measurable effect: about 0.1% added to core PCE inflation
(core CPI) by spring. Nonetheless, these trade measures occur against a backdrop of other
inflation drivers (post-pandemic supply shocks, energy prices, labor tightness).
The net impact on headline inflation varies by country. In the U.S., economists estimate
tariffs have added on the order of one percentage point to inflation since 2022.. (The
IMF notes U.S. headline prices are now running about 3% annually – roughly 1 point
higher than earlier forecasts due to tariffs.) In China, tariffs play a smaller direct role;
Chinese CPI inflation has been near zero (even deflationary at times) amid weak
domestic demand. Most Chinese cost inflation comes from domestic factors (wage and
utility costs). In Europe and other regions, tariffs contribute second-round effects. The
Eurozone, for example, saw consumer inflation fall from double digits in 2022 to the
mid-single-digits by 2024, but part of that decline was attributed to easing global
commodity prices and the fading of earlier tariff shocks. IMF analysis warns that further
tariff escalations could rekindle inflation worldwide, including higher U.S. consumer
prices and second‑round pressures (e.g. from more expensive intermediate inputs).
In short, while tariffs are not the sole cause of recent global inflation, they have
exacerbated price pressures. Policy‐makers note that tariffs paired with high subsidies
(industrial policy) create both inflationary and deflationary forces: consumers face
higher import costs, but domestic producers may be shielded and invest more. Central
banks and governments thus face a challenge: how to restrain inflation without worsening
the trade dislocations that partly fuel it.
Recession Risks
The trade conflict also looms large in the outlook for growth. Tariffs act as a drag on
activity by reducing trade volumes and confidence. At the macro level, analyses warn of
substantial slowdown risks if the dispute deepens. For example, the WTO has estimated
that bilateral U.S.–China goods trade could fall by up to 80% under current tariff plans.
More strikingly, the WTO projects that a full “decoupling” into two economic blocs
might shave about 7% off global GDP in the long run. These are extreme scenarios, but
they illustrate the high stakes.
Several major forecasters have already begun to downgrade growth. The IMF’s April
2025 World Economic Outlook specifically cites U.S. tariffs as a key reason to cut its
growth projections. U.S. GDP growth for 2025 was revised down to 1.8% (from 2.7%),
with the IMF warning that “further escalation in tariffs and trade tensions” is the main
risk ahead. Indeed, the IMF now judges the U.S. recession probability at 40% – up
sharply from 25% a few months prior – largely due to trade policy uncertainty. Some
investment banks have been even more pessimistic: for instance, J.P. Morgan raised its
odds of a global recession this year to 60%, citing “disruptive U.S. policies” and their
likely amplification through retaliation, business sentiment declines and supply‑chain
shocks.
At the regional level, the fallout is spreading. The African Development Bank recently
cut Africa’s 2025 growth forecast by 0.2 percentage point on account of trade‐war
uncertainty, stating that “shocks include a plethora of new tariffs imposed by the United
States and retaliatory measures”.(Although direct US‐Africa trade is small, African
commodity prices and investment flows suffer when U.S. and Chinese growth slow.)
ASEAN countries, too, expect a drag: Goldman Sachs lowered growth forecasts for
Vietnam (5.3% in 2025) and Malaysia (3.8%) as global demand softens.. In sum, a
broad-based tariff stand-off tends to tighten global financial conditions (as markets
demand higher risk premia) and slow world trade, heightening recession risks. Even
though a synchronized 2025 global recession is not yet the baseline, official analysts
caution that the policy‐induced uncertainty and potential further hikes could tip the
balance.
Social Unrest
The economic stresses from tariffs and their side‐effects can also fuel social discontent.
Inflation and job insecurity hit households’ budgets, especially for lower‐income and
middle‐income workers. Many experts warn that a “cost-of-living crisis” could reignite
protests and instability if left unaddressed. For example, higher consumer prices for
goods ranging from electronics to medical supplies raise popular grievances – as does
any jump in unemployment or wage pressure in affected sectors.
Some specific manifestations have already appeared. In the U.S., farmers and
manufacturers who lost Chinese markets under the first trade war have previously
protested and won some government compensation. In 2024, the administration again
sought to shield farmers (and other workers) by subsidies and bailouts for those hurt by
Chinese import curbs. In China, sluggish growth and youth unemployment have
contributed to anxiety (though the government tightly manages dissent). More generally,
democracies worldwide are vulnerable: tariff-driven inflation has been linked to recent
protests in Latin America and Europe (e.g. over rising food and energy prices), with
demonstrators often demanding relief measures. The IMF explicitly notes that worsening
inequality or stagnation – which trade tensions can exacerbate – tends to increase the risk
of “social and political unrest”. In volatile times, policymakers fear that prolonged trade
conflicts could erode the social consensus needed for reform, especially if economic pain
is perceived as misdirected or avoidable.
Major Country Perspectives
- United States: The U.S. government sees tariffs as leverage to address China’s
trade practices (IP theft, forced tech transfer) and as a tool of industrial policy. The
rhetoric is that tariffs will “buy time” for U.S. industries to invest in domestic
capacity (especially under the Inflation Reduction Act and CHIPS Act).
Politically, there is now broad bipartisan support for a tough stance: even many
free‐market Republicans applaud Biden’s tariff hikes (whereas in 2018 they loudly
protested Trump’s move). Some U.S. business sectors (tech, large retailers) still
criticize tariffs for raising costs. In Congress, supporters argue tariffs protect jobs
and force China to “play by the rules”, while critics warn of consumer price hikes.
Overall, the U.S. strategy is of “tactical” tariffs combined with big subsidies for
key industries. The Biden Administration claims it does not seek a trade war but
will defend American interests until Chinese policies change
- China: Beijing formally denounces U.S. tariffs as unilateral and contrary to WTO
rules, pledging “resolute measures” to protect its firms. In practice, China has
moderated its response, reflecting confidence from strengthened domestic
industries (e.g. its booming EV sector) and accumulated foreign reserves. Chinese
leaders argue U.S. tariffs undermine “free trade principles” and will ultimately
hurt U.S. consumers and climate goals. China’s official line emphasizes the need
for dialogue: Premier Li Qiang has urged negotiated solutions to “level playing
field” issues. Meanwhile, China accelerates its “dual circulation” strategy
(boosting domestic demand and internal supply chains) and expands trade with
Europe, Africa and the rest of Asia to reduce dependence on the U.S. market.
Chinese firms are also looking to win market share in countries facing U.S.
restrictions (e.g. Chinese EV makers are courting Europe while U.S. blocks them).
- European Union: The EU is squeezed between its two trading partners. Brussels
generally condemns the US–China tariffs and calls for a negotiated, rules-based
solution. In April 2025 EC President von der Leyen urged China to limit retaliation
and jointly support a “strong reformed trading system”. The EU is especially wary
of trade diversion: officials worry China may dump goods in the EU that would
have gone to the U.S. (and vice versa). Strategically, the EU has ramped up its
own industrial policies (e.g. climate tech subsidies) which partly mirror U.S.
moves. At the same time, the EU has launched tariffs against select Chinese
products (e.g. solar panels, steel) to protect its industry – not as counter-retaliation,
but on WTO grounds of dumping/subsidies. EU–China trade talks continue, but
progress is slow. Overall, European leaders stress WTO reform and avoidance of a
broader trade bloc confrontation.
- ASEAN: Southeast Asian countries face both risks and opportunities. Nations
heavily integrated with Chinese manufacturing (Vietnam, Thailand, Malaysia) risk
supply disruptions, but they also attract “near-shoring” as companies diversify
from China. Emerging Asia’s growth is expected to slow (China’s slump ripples
out), yet intra-regional trade is strengthening. The U.S. has already signaled
(through investigations) very high tariffs on some Southeast Asian exports (solar
panels, machinery, electronics) accused of being Chinese-made. ASEAN
governments are quietly lobbying for exemptions or carve-outs. Many ASEAN
firms have welcomed global value-chain shifts – for example, iPhones are
increasingly assembled in Vietnam, and electronics investment is rising.
Institutions like the Asian Development Bank urge regional cooperation (e.g.
RCEP) to absorb shock, and note that South–South trade (among developing
countries) has been growing faster than traditional North–North trade. In sum,
while ASEAN as a bloc is not a party to the U.S.–China conflict, it must navigate
the spillovers: recalibrating supply chains, managing tariff liabilities, and
exploiting new market niches.
- African Union: Africa’s share of U.S. trade is small (~5%), but the continent is
sensitive to global shocks. Many African governments and the AU Commission
have protested that U.S. global tariffs (on steel, vehicles, etc.) could hurt African
exports and jobs built under past U.S. preferences (AGOA). For instance, South
African industry leaders warned that new U.S. 25–35% auto part tariffs could end
the country’s duty-free access under AGOA. The AfDB has explicitly cited U.S.
and China tariff moves as factors that could shave Africa’s growth by a few tenths
of a percent. With China remaining Africa’s largest trade partner, African
economies also worry about a Chinese slowdown. On balance, Africa has been
calling for multilateral solutions: the AU urges both U.S. and China to consider
developing-country impacts when imposing measures. The continent is
accelerating implementation of its own AfCFTA to foster intra-African trade as a
buffer. African policymakers are also pushing for WTO “special and differential
treatment” safeguards, so that new U.S. or Chinese tariffs explicitly exclude or
phase in concessions for the poorest countries (as UNCTAD recommends)
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