The Evolution of US - China Tax Policies in the Second Phase of the Trade War from Tariff Retaliation to Systemic Decoupling

The U.S.-China trade wars second phase (2022-2025) shifted tax policies from tariff retaliation to systemic decoupling. This paper shows policy evolution across phases via comparative analysis of tariff measures, policy documents, and trade data. The first phase of the trade war (2018-2022) saw reciprocal tariffs: U.S. imposed duties on $550B Chinese goods; China responded symmetrically, using VAT cuts and export rebates, with bilateral trade dropping 12-19%. In the second phase from 2022 to 2025, the main focus shifted to the technology: U.S. imposed 35% tariffs on advanced semiconductors with export controls, while China adopted non-tariff barriers, 15% tax for chip firms, and standard setting. Apart from that, it analyzes WTO disputes to U.S. unilateralism violating rules, China leveraging WTO mechanisms, and finds decoupling accelerating via trade diversion, investment fragmentation, and tech silos. Digital trade grew to $125B in 2024, offering engagement. The study concludes that targeted policies could foster "competitive coexistence." Finally, it shows the possible influences and future outlook.