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What Happens If We Go to War With China?
Apr 17, 2025
Tensions between China and the U.S. have been building for years, and recent events have made conflict even more likely. If you have been following the news, you probably feel some anxiety when reading about military exercises, trade disputes, and political skirmishes, as you wonder: What happens if we go to war with China?
This Trump’s tariffs 2025 guide will help you address these concerns. Understanding what would happen if the U.S. went to war with China can help you prepare for any impending economic fallout. It’s an increasingly likely scenario that could affect us all, and being ready can make a difference. GoMoon's AI-powered economic calendar can smooth the transition and help you navigate the challenges ahead.
Table of Contents
What Do the U.S. and China Import From Each Other?
The U.S. relies on China for over $500 billion in annual imports. Any military conflict between the two nations would disrupt the flow of essential goods, causing immediate shortages in the U.S. supply chain. For example, the U.S. depends on China for critical electronics and components, including semiconductors in everything from cars to medical devices; machinery and equipment; furniture and home goods; toys, textiles, and plastics; and medical and pharmaceutical products. U.S. retailers, manufacturers, and hospitals would face supply shortages without Chinese imports in less than 60 days.
What if We Go to War with China? A Look at U.S. Exports to China
While less than one-third of what the U.S. imports from China, U.S. exports to China are still crucial. In 2021, the U.S. sent approximately $150 billion in goods to China. If military conflict broke out, a sudden halt to these exports would devastate key sectors of the U.S. economy. For instance, China is the largest buyer of U.S. soybeans and also purchases substantial amounts of corn, wheat, and pork. Disrupting these agricultural exports would pose a serious problem for American farmers. Additionally, while China manufactures many electronics, it still depends on U.S. semiconductors and high-end components for advanced technology.
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What Happens When the U.S. Goes to War With China?
Global Supply Chain Disruption
A U.S.-China war would trigger a massive trade freeze, stopping the flow of goods between both nations. This would include halting shipments, blocking maritime routes, and placing complete embargoes on each other's imports and exports. This would paralyze manufacturing, especially electronics, automobiles, pharmaceuticals, and defense equipment.
Port Closures & Logistics Breakdown
The South China Sea is one of the busiest trade corridors globally. A war here would stall maritime shipping, skyrocket freight costs, and delay deliveries worldwide.
Critical Component Shortages
U.S. factories rely on Chinese-made parts, while China relies on American-designed chips and agriculture. The breakdown would halt the production of smartphones, EVs, AI processors, and more.
Economic Fallout in Both Nations
A war would trigger panic in financial markets, weaken consumer confidence, and disrupt domestic manufacturing. In a matter of months, the U.S. could face recession-level impacts.
Stock Markets Would Plunge
Global equity markets, particularly in Asia, the U.S., and Europe, would tank in response to fears of prolonged conflict and supply shocks.
Potential Retaliation Measures
Both nations may freeze each other’s financial assets, target corporations (e.g., banning Apple or Huawei), and restrict access to the SWIFT banking network.
Why This Section Matters for Traders
For everyday and pro traders using platforms like GoMoon, understanding this escalation is critical because: A war would not only drop stock and crypto prices, it would also change:
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How a War With China Affects the Forex and Crypto Market
Unexpected Outcomes of a U.S.-China War on Forex Markets
A potential conflict with China would have disastrous effects on the forex market. Traders would respond to the initial shock of a war announcement by fleeing to safe-haven assets. Here’s what to expect in the forex markets if tensions escalate into conflict.
Flight to Safe-Haven Currencies
In geopolitical conflict, traders usually flee to currencies considered stable and low-risk. These typically include:
Japanese Yen (JPY)
Swiss Franc (CHF)
U.S. Dollar (USD), though its strength may be questioned in a direct U.S. war
Gold-backed instruments
Pressure on Emerging Market Currencies
Asian currencies (like the Chinese Yuan, South Korean Won, or Singapore Dollar) would face major selloffs due to:
Capital flight
Supply chain disruptions
Fear of regional spillover
Volatility in USD/CNY Pair
The U.S. dollar vs. Chinese yuan would likely become one of the most volatile pairs globally. Traders may see large, fast swings driven by:
Capital controls from China
Sanctions from the U.S.
Central bank interventions on both sides
Euro Could Become a Secondary Safe Haven
If Europe remains neutral, EUR could gain inflows from cautious investors exiting Asian and American exposure.
What Happens If We Go To War With China? Impact on the Crypto Market
A potential conflict with China would rock the world of crypto. Here’s what to expect in the crypto markets if tensions conflict.
Bitcoin Volatility Spikes
Depending on the market mood, Bitcoin often acts as a risk asset and a haven. During the initial war shock:
BTC might sell off sharply as traders de-risk
It could rebound strongly if confidence in fiat systems drops
Stablecoin Demand Surges
USDT and USDC may see record demand from Chinese and global users fleeing CNY instability. This could cause de-pegging risks or premium pricing on centralized exchanges.
China-Based Tokens Drop
Any project associated with China exchanges, L1 chains, or utility tokens may face delistings, regulatory scrutiny, or user abandonment.
Ethereum and Layer 2s May Surge Later.
If financial censorship becomes an issue during the war, Ethereum and its scaling solutions may benefit as decentralized alternatives to banking rails.
Historical Reference: The 2025 Tariff Pause Relief
Earlier in 2025, markets showed us how fast geopolitical easing can reverse damage: The 90-day tariff pause announced by Trump caused BTC to rebound from $77K to $82K in days. USD/JPY stabilized, and volatility cooled across multiple forex pairs. Platforms like GoMoon saw a spike in real-time trading signal demand during that period, highlighting the need for fast, automated sentiment analysis.
How Traders Can Prepare and Stay Ahead During a U.S.–China War Scenario
1. Diversify Exposure Across Asset Classes
When geopolitical tensions rise, markets can suddenly shift. Don't overcommit to a single market (e.g., crypto-only or forex-only). Instead, diversify across forex (safe-haven currencies), commodities (like gold and oil), and defensive crypto assets (e.g., BTC, stablecoins). GoMoon’s portfolio analyzer lets you simulate different markets' behavior during risk-off environments.
2. Track Geopolitical Sentiment in Real-Time
Understanding how news affects markets can help traders prepare for upcoming volatility. Use GoMoon’s AI-powered sentiment dashboard to monitor key global news headlines, Telegram and Twitter sentiment shifts, and spikes in volatility indicators. Create keyword alerts for terms like “Taiwan Strait,” “sanctions,” “Beijing,” “defense budget,” and “cyberattacks.”
3. Focus on Safe-Haven Trading Pairs
In forex, prioritize USD/JPY, USD/CHF, and USD/SGD during uncertainty. Monitor EUR/USD for signs of alternative capital flows. In crypto, expect short-term Bitcoin drops but long-term accumulation potential. Use GoMoon to backtest past war-period behavior and set alerts for BTC breakouts or RSI oversold entries.
4. Hedge With Stablecoins and Gold-Linked Instruments
When volatility spikes, convert profits into stablecoins (e.g., USDT or USDC). Consider instruments like Paxos Gold (PAXG) or tokenized treasuries to ride out uncertain weeks. GoMoon supports tracking stablecoin flow data and whale movements, helping users anticipate demand spikes.
5. Implement Stop-Loss and Capital Protection Measures
Tighten stop-losses during unpredictable news cycles. Allocate less capital per trade and increase cash positions. GoMoon’s intelligent trading assistant can help set dynamic stop-loss levels based on real-time volatility and sentiment changes.
6. Join War-Prepared Trader Communities
Being in an active community can help you spot early risks or reversals. GoMoon gives you access to curated Discord and Telegram groups filled with macro-aware traders. Discuss whether the USD will weaken further or if Bitcoin might emerge as a digital haven.
7. Run Backtests and Set Scenarios in Advance
Use GoMoon’s historical scenario simulator to test how similar conflicts affected markets (e.g., the 2022 Russia-Ukraine war). Pre-load setups for U.S. military action in the South China Sea, Taiwan-based supply chain disruption, and sanctions targeting Chinese banking or exports.
Let’s Talk About GoMoon AI Calendar
GoMoon transforms economic calendar data with AI-powered insights for smarter trading decisions. Our platform analyzes global events and rates their market impact on a scale of 1-10, helping you understand how they'll affect various assets. We've packed everything traders need: Live economic event streaming, custom notifications, and historical event replay with TradingView charts. What sets us apart is our comprehensive approach to event analysis.
Whether you're tracking the impact of major economic announcements or comparing forecast data with actual outcomes, GoMoon provides clear, actionable insights. You can personalize your calendar, stream live meetings directly on the platform, and analyze historical events like the dot-com bubble or the COVID-19 crash to understand market reactions better. GoMoon clarifies the complex world of economic events for traders seeking data-driven decisions. Get started for free to get AI-powered economic insights today.
Use Our AI-powered Economic Calendar Tool for Free Today
I can’t help but think of the impact tariffs could have when the US goes to war with China. War would likely cause extensive economic fallout, and the government could respond by raising existing tariffs or implementing new ones on Chinese goods to support domestic industries. Tariffs could also remain in place for years after the conflict ends to aid recovery. Get started for free to get AI-powered economic insights today.
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