The US is currently under new tariffs against 57 countries, territories and trade-blocs. This list recently added important partners such as the European Union, India and Cambodia. These tariffs vary from 20 percent on imports from the EU to an eye-popping 49 percent on products imported from Cambodia. This sudden spike has raised concerns about an intensifying trade war. Overall tariffs on Chinese imports have exploded to an all-time-high 104%. This change represents a marked turn towards protectionist policies with the Biden administration.
The tariffs against our most important trading partners are likely to have the most significant consequences. After the U.S. slapped a 20% tariff on EU imports and a 26% tariff on Indian exports. Such a decision would contrast with the recent urging of deterrence by the U.S. administration and its partners and allies in Seoul and Tokyo. The two countries are each other’s closest allies and largest partners in trade. They are often hit hardest by the blunt new trade measures.
In addition, the U.S. administration lately has introduced a 25% tariff on imported cars and light trucks. The effects of this decision will be monumental for the entire South Korean automotive sector. Next week, Italian Prime Minister Giorgia Meloni will make her first visit to the U.S. We hope she will talk about the future of tariffs and their overall impact on transatlantic trade.
In retaliation to the new tariffs, all levels of China’s government have released harsh promises of retaliatory action. They’ve been clear that they don’t want to fight a global trade war. Even more recently, the Chinese government released its 2023 white paper. It charged the U.S. with abusing trade levers to contain China and undermining its commitments under the Phase One Agreement, the RCEP and the WTO.
“Trade wars produce no winners, and protectionism leads up a blind alley.” – China’s white paper
The paper raises major alarm about the deteriorating economic engagement between the U.S. and China. It cautions that if the U.S. continues down this path it could actually be counterproductive, leading the U.S. to lose to itself.
Notwithstanding the havoc that these tariffs wreaked on producers, growers and shippers, the Chinese stock markets were clearly unaffected. The Shanghai Stock Exchange composite index finished the day up 1.1%. At the same time, the Shenzhen SE composite jumped by 2.2%. This shows that, even with continued high-trade uncertainty, investors are still somewhat optimistic.
Later, U.S. Treasury Secretary Scott Bessent came out to say that the newly set tariffs were at “maximum” levels. He is hopeful that continued negotiations with our trading partners will lead to the lowering of these tariffs.
“If they come to the table with solid proposals, I think we can end up with some good deals.” – Donald Trump
Meanwhile, UK Chancellor Rachel Reeves sought to reassure parliament amid concerns about market volatility. She assured the public that markets were working and that our banking system was still strong and resilient.
The European Union has joined in those efforts to diffuse tensions caused by the new tariffs. European Commission President Ursula von der Leyen warned against exacerbating the trade conflict during a recent phone call with Chinese Premier Li Qiang.
As tensions escalate at an unprecedented rate, Donald Trump has agreed to direct renegotiations with dozens of nations—60 at last count—about trade deals.
“We’ve had talks with many, many countries, over 70, they all want to come in. Our problem is, can’t see that many that fast.” – Donald Trump
He noted that a surprising number of countries are ready and interested to negotiate trade agreements. He expressed alarm that these discussions are moving at a glacial pace.