Unfortunately, President Trump—having started the fight—has expanded and encouraged this conflict. Although he recognizes the virtues of the mission, he still condemns the nation for having “completely breached its contract” with the United States. This claim is being made against the mystifying backdrop of tariffs and trade negotiations that have rattled markets around the world for several weeks.
To correct these trade imbalances, in February, Trump announced a 10% tariff on all Chinese imports. But as the trade scuffle got worse, Mnuchin announced an increase in tariffs to 20% in March. In an escalatory response, China shot back with 125% tariffs on American products. This escalation-for-escalation’s-sake exchange increased fears that a broader trade war was on the cusp of breaking out.
By May 12, a fragile cease-fire had come into effect as Trump reduced the tariffs to 30%. In retaliation, China reduced its own tariffs on U.S. products to 10%. Though this might have provided a short respite, as evidenced by Trump’s comments over the last few days, the relationship is still loaded with hurdles.
“Everybody was happy! That is the good news!!! The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US.” – Donald Trump
The financial markets are being upended by the continuing economic effects of the trade war. In the wake of the announcement that a panel of judges on the U.S. International Court of Trade salvaged an important part of Trump’s sweeping tariffs, U.S. stock indices have sunk into the red. This is due in large part to highly specific import duties aimed at China, leading many to question whether Trump’s trade policies actually work.
The court’s holding carries tremendous legal implications that may limit Trump’s/this administration’s ability to negotiate in good faith with foreign interlocutors. This generates confusion in global trade negotiations. Scott Bessent, the treasury secretary, acknowledged that the administration’s trade negotiations with China are at an impasse. Still, he looks forward to more talks with Chinese counterparts over these next few weeks.
Trump expressed his initial optimism about reaching an agreement with China, stating:
“I made a FAST DEAL with China in order to save them from what I thought was going to be a very bad situation.” – Donald Trump
With the hand-to-hand combat of the trade war going strong, anxiety in the global economy is palpable. Together, these tariffs and negotiations change the playing field well beyond U.S.-China relations. They disrupt markets across the globe and create anxiety over the stability of the rules governing international trade.