China hit back with 34% tariffs on all U.S. goods
The Game Change in the U.S. Trade War: Implications for China and for the Restricted Growth of the United States and the Global Economy
President Trump’s sweeping tariff announcement Wednesday triggered a sharp drop in U.S. stock markets, a flashing-red warning sign of the economic fallout that’s expected to result from the widening trade war.
Around midday Thursday, the Dow Jones Industrial Average had tumbled over 1,200 points, or 3%. The S&P 500 index was down 4% and the tech-laden index was down 5%.
China is a case in point. The US imported about $439 billion of Chinese products last year, while exporting less than $150 billion. This formula says that a Chinese tax of 67% should correct the trade imbalance. Trump said on Wednesday that the actual tariffs would only be 34%.
Economists warn the new taxes will result in higher prices and slower growth in the United States, while likely pushing many other countries into recession.
The prevailing U.S. import tax increased by almost nine-fold due to the tariffs. The size and scope of the levies took many investors by surprise.
The game change is not only for the US economy and the global economy, it’s also for the entire world. “You can Throw most forecasts out the door, if the tariffs stay on for an extended period of time,” said Sonola in his research note.
Wang thinks that Trump is using tariffs in order to get countries to make deals and that he raises the stakes if he doesn’t succeed.
“We are going to make a lot of stuff in America, which is important to us,” said Trump in the White House Rose Garden. “They’re coming back to us because they have to pay a tax if they don’t.”
Many factories are bracing for higher prices and a loss of export markets because they are the beneficiaries of the trade war. The trading partners have already said they’re going to retaliate with their own tariffs.
“Here it comes and we’re already seeing that,” said Tim Fiore, who conducts a monthly survey of factory managers for the Institute for Supply Management. “The retaliatory tariffs are going to be really ugly. Demand is just going to be killed.
The US launched a worldwide trade war in the 1930s. It did not end well. The notorious Smoot-Hawley tariffs are widely thought to have worsened the Great Depression.
“It was bad for consumers, because it meant higher prices,” says former Treasury Secretary Larry Summers. It was bad for producers because it meant more input costs. It undermined comity among nations and that was bad for peace.
Economists say that the new tariffs will hit products the U.S. is unable to produce, such as coffee and bananas.
In fact, for possibly the first time ever, the administration is explicitly acknowledging some of the basic economic logic of tariffs. Prices are raised by tariffs. And higher prices do cause people to buy less stuff. And if Americans buy less foreign stuff, then America’s trade deficit with other countries will narrow.
This is different from the previous statements that he has made regarding tariffs, where he has denied that they will raise prices or that he doesn’t care.
There’s a blunt approach behind the Greek letters. The equation is meant to answer the question “How high should tariffs be?” in order to get Americans to buy less foreign products. This math says, the more of a trade deficit the U.S. has with another country, the higher that tariffs should be on that country’s products.
That is not true. These are not reciprocal tariffs. They do not correspond to the tariff rates in other countries. The truth behind the tariffs is more interesting than you might think.
When President Trump announced his latest tariffs on Wednesday, he also ignited an economic mystery. Where in the world did those numbers come from?
Will the trade deficit actually be closed by Trump’s tariffs? Maybe, maybe not. Finally, the administration has shown it’s work. According to their calculations, the tariffs are designed to increase prices and close the trade deficit.
The American Dream of Xietao: Implications for the United States and the Rule of Law in the Post-Trump Era
Xie says that if there is a desire for China to play a more active role in the world, Chinese leadership wouldn’t say no. But he also believes that China would avoid direct confrontation with the U.S. and avoid claims to leadership in every aspect of international affairs.
Some of the China’s America watchers were cautious about the new administration’s views and skepticism about China’s appetite to eat America’s lunch.
In January 2020, the U.S. and China signed a deal to lower China’s trade surplus with the U.S., but it quickly fell through, suggesting that China will be hesitant of any attempt by Trump to strike another such deal.
Shi Yinhong, a professor at the People’s University, is skeptical of any chance to visit an American university.
In Trumps second term, I believe there’s a window of opportunity for both sides to really strike a deal. If the window of opportunity is gone, Trump might be tempted to return to his more aggressive approach.
He says you must be very careful when it comes to the international arena. You don’t want to be too ambitious. You don’t want to make promises that you cannot fulfill.”
“Look at the dismantling of the USAID and many other foreign aid projects,” he says. “It does appear to present an unprecedented opportunity for China to present its own alternative version of a just world.”
Xietao received his Ph.d. from the University of Wisconsin in 2007, and he sees an opening for China.
“I’ll be speaking to President Xi. I have a good relationship with him. We have a trillion-dollar deficit because of Biden, but we’ll have a good relationship, Trump told reporters in the Oval Office.
“As Napoleon famously said, when your enemy is making a mistake, don’t do anything to disturb him,” he says. I think China’s strategy will be more of a wait and watch.
Wang, who researches China at the Asia Society Policy Institute in New York, believes that there’s no need for China to be in a hurry when things in the U.S. are going its way.
Wang did not go through the hardship and political campaigns that older Chinese did. The country was relatively open during the reform era when Wang was coming of age.
The U.S. is a Great Opportunity for China, and Why It’s Happening Here: A Statement on the US Trade Agreement with China
In a statement announcing the new tariff, China’s finance ministry declared that the US tariff on Chinese goods “seriously undermines China’s legitimate rights and interests,” and called it a “typical unilateral bullying practice.”
Regardless of how Chinese observers think China should respond to any perceived openings or opportunities, the changes in the U.S. resonate on a personal level with America watchers, many of whom have lived and been educated in the U.S.
Beijing began allowing its students to study in America in the 1980s, which resulted in Zha Zhenying studying at Columbia University and the University of South Carolina.
Zha is a Chinese liberal who used to look to America as a role model to help change China into a more democratic direction. Recent developments in America under the Trump administration, she says, “have been really shocking and bewildering and in some sense disillusioning.”
But for the Chinese state, she says, “it’s definitely an opportunity, because what’s happening in the U.S. does a better job than state propaganda could do to demonize America as, you know, a phony democracy, which really is an imperialist power.”
Wang Haolan, who was born in 1997, has never seen the U.S. as a beacon. “I have never believed the U.S. was that great,” he says. This view is indicated by the name of his popular show, The American Roulette.
The U.S. action jeopardizes the development of the global economy and the stabilization of production and supply chains, it said.
In explaining its retaliatory tariffs, the finance ministry said the imposition of tariffs by the United States is “not in line with international trade rules, seriously undermines China’s legitimate rights and interests, and is a typical unilateral bullying practice”.
Trade War between the Two Superpowers: Implications for Trade and Economic Cooperation between China and India – a Response from the United States
The ministry is imposing export controls on some rare earth minerals. They include gadolinium, terbium, dysprosium, lutetium, and yttrium.
The 11 American businesses have also been added to the country’s “Unreliable Entity List”, as they are accused of having military and technological cooperation with Taiwan. Skydio, which started making consumer drones but pivoted to enterprise in 2020, is a new addition to the drone and defense companies.
“These entities have acted in a manner that may jeopardize the security and interests of China, and no export operator is allowed to violate these provisions,” it said.
China’s commerce ministry said on Friday that it is adding 16 U.S. entities to an export control list, banning them from acquiring Chinese products for civilian and military purposes.
“This is an aggressive, escalatory response that makes a near-term deal to end the trade war between the two superpowers highly unlikely,” its analysts wrote in a note.
The report states that China filed a lawsuit against the WTO after a dispute over Trump’s tariffs on the country.
China is also launching investigations into exports of X-ray tubes from America and India, amid allegations of “dumping” — when exported goods are sold for less than their domestic price, damaging the local industry. The US dominates international medical device trade.
The Chinese levy will go into effect on April 10th, one day after the US’s new tariff starts to apply. China has also imposed strict limits on the exports of some rare earth elements that are mined almost exclusively in China, used in electric vehicles, weapons, and other tech.
