Former President Donald Trump recently took to TruthSocial with a doozy of a proposal. He then called on China to increase its purchases of U.S. soybeans four-fold. This announcement comes right before the agreement’s 90-day halt on tariffs between the two countries expires. The Minister’s cavalier attitude has led many to wonder how this will damage China-Canada trade relations.
US exports to China now face tariffs averaging nearly 30%. Imports from China are being hit with a 10% baseline tariff, plus an additional 20% as punishment for supposedly smuggling fentanyl. During the campaign, Trump threatened to impose new tariffs of as high as 245% on Chinese imports. This eye-catching gambit has led to widespread panic that China would quickly respond with counter-tariffs of its own, possibly up to 125%.
In an effort to facilitate negotiations, Trump signed an executive order. This new order postpones the implementation of higher tariffs on all of China until November 9th. This extension is the result of months of back-and-forth negotiations between US and Chinese officials, including negotiations that took place in Stockholm last month. US Treasury Secretary Scott Bessent mentioned that the US has “the makings” of a trade deal with China, highlighting a potential shift towards positive outcomes.
Chinese officials have clearly communicated that they expect the US to be a partner that works with them to realize positive outcomes. Lin Jian, a spokesperson for the Chinese government, stated:
“We hope that the US will work with China to follow the important consensus reached during the phone call between the two heads of state … and strive for positive outcomes on the basis of equality, respect and mutual benefit.”
This trade framework is deeply alarming to a growing number of economists and policy-makers. As the Federal Reserve and numerous experts have testified, tariffs are likely to result in higher prices for American consumers. Stephen Olson, a former US trade negotiator, commented on the implications of the existing trade policies, stating:
“What we are seeing is in effect the monetization of US trade policy in which US companies must pay the US government for permission to export. If that’s the case, we’ve entered into a new and dangerous world.”
In light of these negotiations, it will be interesting to see how these two countries approach their trade relationship in the years to come. The final result of these discussions will greatly impact market competitive forces and economic growth on each side.