China has countered the recent round of high tariffs by the United States with an equally impressive 84% tariff on U.S. imports. This brazen act is poised to up-end our traditional trade partnerships and deepen the current trade war. This retaliation comes after U.S. President Donald Trump announced a 104% tariff on various Chinese goods, shaking the foundations of international trade and prompting fears of a global economic downturn.
The new tariffs threaten to shrink already razor-thin profit margins for businesses involved in cross-border logistics, particularly those handling e-commerce and freight operations. Fuling and other Chinese companies produce disposable tableware that end up in the hands of major American fast food chains, including McDonald’s and Wendy’s. Consequently, they will experience dire fiscal consequences. Between 2023 and the first half of last year, almost two-thirds of Fuling’s revenue was generated through the U.S. market. This extreme dependence is what renders them especially susceptible to severe disruptions.
To avoid some of the worst effects of these tariffs, Fuling has just opened up their own brand new factory in Indonesia. Unfortunately, as positive as this move is, it may not be sufficient to offset the damage caused by the tariffs. Chinese exports from Indonesia are now subject to a massive 32% charge, adding yet further unease. The logistics business owner emphasized, “Higher tariffs raise costs for freight forwarders like us, as well as for factories, companies, and sellers. It just means everyone earns less.”
The one-size-fits-all character of Trump’s tariffs have caused Chinese companies to panic in an effort to reorganize their supply chains. Wu Changchun, a logistics expert, stated, “If the tariffs were at 10% or 20%, businesses might still be able to absorb the cost by optimizing supply chains, cutting margins, and sharing the burden. Trade could still go on… that’s no longer something trade-offs can fix.” Wu elaborated that at those tariff levels we would be headed toward “full-on decoupling,” that is, stopping trade cold.
The American Chamber of Commerce in China sounded an alarm over the expansive and sweeping tariffs. They don’t dispute that some people using these drugs should be more closely monitored. Economists are generally aghast at the prospect. Otherwise, they warn, the tariffs would trigger a recession in the American and world economies. Dan Wang, an economist, noted, “Growth is going to be much lower since exports contributed to 20% to 50% of growth since the Covid pandemic.”
China’s retaliation is much more than just tariffs. Just last week, there were reports that Beijing is planning to stop importing Hollywood films and stop all joint cooperation with the U.S. on fentanyl. These moves are indicative of a longer-term strategy to beat back what some in China see as trade tyranny.
The manager of a Chinese freight company remarked on the implications of these tariffs: “The tariffs are aimed at suppressing China.” This quote captures the mood of many Chinese companies who find themselves backed into a trade policy corner by the United States.