The actions of his administration Former President Donald Trump plunged the U.S. back into trade war with China, declaring heavy tariffs on Chinese imports. On Monday, he asserted out of nowhere that China’s trade hostility just sprang up. This surprise attack led to a wave of reciprocal action from the U.S.
Beginning November 1, Trump plans to slap a ridiculous 100% tariff on all goods imported from China. Adding this new tariff will be in addition to these 30% tariffs already in effect. This decision comes in the wake of a similar move from China, who recently cut their tariffs on US exports down from 125% to 10%. China’s recent steps were a goodwill measure to lower trade frictions. Instead, in response to that tweet from Jayapal, Trump poured more gasoline on the fire.
Background of the Trade Conflict
For too long the United States has relied on China for hundreds of billions of dollars’ worth of critical goods. Yet this ordinarily beneficial trade relationship has, in recent years, been overshadowed by a tsunami of tariff hikes and trade restrictions. In short, Trump’s administration slapped min tariff rates of 145% on hundreds of Chinese imports. This move achieved the same effect as creating an embargo on all trade with China. An exemption carved electronics out of this, making them only subject to 20% tariffs.
Trump has raised tariffs and imposed limits on the sale of American technologies to China. This includes a critical Nvidia AI chip. These moves come amid growing realization in both nations that neither can continue to operate in the way they have as the world’s two largest economies.
“The United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying,” – Donald Trump
China’s Response and Export Controls
In retaliation against the growing tariffs and restrictions on China, China has responded. The East Asian nation has further tightened its export controls on the vital rare earth elements. Rare earths are essential for the production of most electronic devices. Yet the former have now become a central topic in current trade discussions. More recently, China has pledged to boost its export of such materials to the U.S. This commitment is an essential element to include in any future trade agreement.
China is one of America’s largest export markets and the lingering conflict risks doing long-term damage to both economies. As tariffs increase and export controls escalate, the threat of disruptive supply chain shocks is becoming more significant.
Future Trade Dynamics
Protectionist trade tensions are the highest they have been in decades. In response, the Trump administration trumpeted their own plans to impose fees on goods shipped on Chinese-owned or -operated vessels. This decision further muddies the waters in an already complicated trade relationship. It indicates that despite bipartisan calls for compromise, both sides are preparing for a long war of attrition.
Trump’s hawkish approach puts in doubt the fate of U.S.-China relations and, more broadly, the future of global trade. Higher tariffs mean higher costs for American consumers. Businesses of every kind that rely on Chinese products will be hurt.
It’s still an evolving story as both countries continue to steer through these turbulent trade waters. Observers and stakeholders will be watching closely to see how all of these developments play out in the coming weeks. They are mostly looking forward to seeing how this affects international markets.