The Trump administration is planning to use ongoing tariff negotiations as a strategic tool to pressure U.S. trading partners into limiting their business dealings with China. The U.S.-China trade war, which began in early 2018 and continues today, is still remaking the overall global economic landscape. President Joe Biden has maintained existing tariffs and even introduced additional levies since taking office, indicating a continuation of aggressive trade policies.
As the 2024 election nears, Donald Trump has promised to raise a shocking 60% tariff on all imports from China. This pledge is an unmistakable signal that they plan to wind trade war back up where it stopped. These retaliatory tit-for-tat policies have not only damaged global supply chains irreparably, they’ve reduced worldwide investment spending. The increase of tariffs and retaliatory actions taken in response have more than directly caused inflationary pressures shown in the Consumer Price Index.
All of this has kindled the Trump Administration to pursue negotiations with more than 70 countries. They are calling on further restrictions on Chinese products that transship through these distributed countries. The goal of this initiative is to prevent Chinese firms from opening new facilities overseas in order to avoid U.S. tariffs.
Background of the Trade War
The geopolitical/economic war between the United States and China erupted in early 2018. During this same period, President Donald Trump enacted major trade barriers against China. His administration often pointed to unfair commercial practices and intellectual property theft as key justifications used to impose the tariffs. China responded severely against this hawkish turn. They retaliated with tariffs of their own on U.S. products that ranged from soybeans to automobiles.
In the ensuing months, military and political tensions intensified between the two emerging economic superpowers. Though it embroiled the two countries in a bitter trade war on a bilateral basis, the ramifications of the trade war had unprecedented effects on global markets. Countries struggled to understand the confusing realities of this economic war. At the same time, businesses were left in the dark—which brought international trade to a crawl.
In January 2020, the US and China managed to sign the US-China Phase One trade deal, providing a temporary reprieve amid rising tensions. Yet there were still critical issues left unanswered, with the specter of a return to hostilities hanging over the economic landscape.
Current Economic Impact
The administration’s destabilizing and irresponsible trade war is quickly wreaking havoc on global supply chains. Consequently, expenditure and capital investment have dropped alarmingly. Businesses that depend on imports from China are now suffering under the burden of tariffs. In response, they are re-evaluating their supply chain strategies. This strategic realignment frequently leads to increased consumer costs and diminished global competitiveness for American enterprises.
War has more dire ramifications than just stifling trade. It’s affecting more macroeconomic gauges, contributing to accelerating inflation. The CPI index is under serious pressure. Higher prices for imported commodities are pushing up overall inflation measures. A sinking U.S. Dollar Index was an early indicator of economic panic. It was down 0.12% to 100.05 as of writing.
Fifty commodities including gold, grain and lumber are making their case right now in the chaos. On Tuesday, inflation-protected gold prices were holding firm at just above $3,200 per troy ounce. This stability suggests that investors are seeking safe-haven assets as they navigate a tumultuous economic environment marked by trade conflicts.
Future Considerations
The Trump administration’s approach of simultaneously negotiating with several countries at once is a double-edged sword. The U.S. is successfully building international coalitions to push back on Chinese state-owned enterprises and other significant trade violations. This new effort is intended to make it more difficult for Chinese companies to do business outside of China. These types of endeavors would not only reshape international trading weaponizations, but begin to rebuild advantageous partnerships with allied countries.
The purpose of these negotiations should be to avoid unnecessary friction with trading partners who want to keep communications channels open with China. Countries may be forced to make hard decisions between supporting U.S. policies or maintaining positive trade ties with China. The effects of these decisions may reorient global trade routes for decades.