After US President Donald Trump suspended “mutual tariffs” on his major US trading partners on April 9, he expanded them to Chinese goods. US trade tax on most imports from China has risen to 145%. Beijing retaliated with its own obligations, at 125% on US goods.
Trump has long accused China of exploiting the US through trade and has cast tariffs as needed to bring domestic manufacturing and re-coastal employment back to the US. He also wants to use tariffs to fund tax cuts. Most economists still maintain that skeptical Trump will achieve his goals.
For now, the US and China are trapped in a chicken high stakes game. The world is waiting to see which countries surrender and which countries remain on the course. As Trump approaches his first 100 days with his second appointment, this is where a tariff war with China stands.
What’s going on in the negotiations?
Trump recently carried out the possibility of securing a trade deal with China. Last week, the US president said his tariffs on China would “reduce significantly” in the near future.
“We intend to do fair deals with China,” Trump told reporters on April 23, stoking hopes of de-escalation. He also said his administration is negotiating with the Chinese side without detailing it.
However, on April 24, China’s Commerce Department rejected President Trump’s remarks, saying there were no meetings between the two countries.
“The claims regarding progress in economic and trade negotiations between China and the US are unfounded and virtually unfounded,” said his Yadong, a spokesman for the province.
He insisted that Beijing would not avoid an economic blow from Washington, but he also said the doors were “wide open” for consultations.
Last week, Reuters news agency reported that China was assessing its exemption from selected US imports. This is a list of up to 131 products.
Beijing has not issued an official statement on the issue.
Did the tariff war affect US exports?
Trump introduced China three weeks ago to his sweeping tariffs. Fallout for our businesses won’t feel completely until later this year. Still, the warning signal is already blinking red.
USDA data shows that soybean exports, the largest U.S. farm export, dropped dramatically between April 11 and 17, the first week of reporting since Trump’s announcement of Chinese tariffs.
By April 17th, net US soybean sales had fallen 50% compared to the previous week. This was driven by a 67% decline in weekly soybean exports to China.
According to Pierguy Seppe Fornato, an adjunct professor of economics at the University of Neuchâtel in Switzerland, “China’s retaliatory tariffs will be hit hard on us. Some may go out of business,” he added that all sectors exposed to China are tense.
In 2023, the US exported approximately $15 billion in oil, gas and coal to China. Losing that market will raid the US energy company.
Is importing into the US going to be a hit?
Cargo transport has plummeted since the start of Trump’s tariff war. According to shipping data provider Linerlytica, China’s freight reservations for the US fell by 30-60% in April.
The dramatic cuts in shipping from America’s third largest trading partner after Canada and Mexico have yet to be felt. However, in May, thousands of businesses will need to restock their inventory.
Retail giants Walmart and Target told Trump at a meeting last week that shoppers are likely to see empty shelves and higher prices starting next month, according to Bloomberg News. They also warned that the supply shock could unfold at Christmas.
Electronic devices such as televisions and washing machines accounted for 46.4% of imports from the US from China in 2022. The US also imports many clothing and pharmaceutical products ingredients from China. Prices for these items will start to rise from next month.
On April 22, the International Monetary Fund raised its US inflation forecast to 3% in 2025 due to tariffs. Lenders also lowered US economic growth forecasts, raising expectations that the US will fall into a recession this year.
What will China’s economy be affected?
Despite growing tensions between the US and China, Washington and Beijing remain major trading partners.
The US imported $43.89 billion into Chinese goods last year, according to the US Trade Representative.
This represents about 3% of China’s total economic output and is heavily dependent on exports.
In a report shared with clients this month, Goldman Sachs said he hopes Trump’s tariffs will lower China’s gross domestic product by up to 2.4 percentage points.
China’s top official said the country could do it without importing US farms and energy, and has pledged to meet this year’s 5% GDP growth target.
Zhao Chenxin, vice-chairman of the National Development and Reform Committee, said domestic farms and energy production, along with non-US imports, is sufficient to meet demand.
“Not buying feed grains or oilseeds from the US will have much impact on our country’s grain supply,” Zhao said Monday.
He also noted that if companies stop importing fossil fuels, it will have a limited impact on China’s energy supply.
In some respects, experts said China is preparing for the crisis.
Furtunato told Al Jazeera: “The tariffs slow GDP growth as the US is one of China’s largest export markets.
He also said, “The United States relies on China for up to 60% of the important mineral imports used for everything from clean energy to military technology. The United States is more vulnerable because there is simply no opposition.”
Could the US lose its geopolitical status?
Trump keeps little secret in his desire to draft US allies into a trade war. The administration said it aims to attack free trade transactions with the European Union, the UK and Japan.
More generally, the report suggests that Washington is asking its trading partners to ease economic ties with China as a precondition to ensure relief from Trump’s “mutual” tariffs.
Nevertheless, US allies appear to be heavily opposed to an economic showdown with China. Last week, the European Commission said it did not intend to “separate” from China.
Elsewhere, British Prime Minister Rachel Reeves recently told the Daily Telegraph newspaper:
Many countries are not in a position to abandon their trade ties with Beijing. In particular, the EU is facing a major trade deficit with China. Blocking access to Chinese products – both consumer products and industry inputs – will hurt an already dull economy.
China’s trade role is equally important across developing countries. About a quarter of Bangladesh and Cambodia’s imports come from China. Nigeria and Saudi Arabia likewise rely on Beijing to import goods.
“It’s hard to see why the US wants to undermine its business interests in order to reduce its trade deficit with China,” Fortunato said. “In this respect, Trump is shortsighted and I think he might be forced to blink first by lowering tariffs with China.”
Has Trump lost his grip on Republican voters?
The Chinese Communist Party does not need to worry about the next election cycle. Beijing has a political advantage in Trump’s trade war, as Trump’s Republicans do so. Simply put, it has more time.
For Trump’s party, his saber rattle is already politically expensive. A new economist Iugoff poll shows Americans report that Trump’s economic behavior hurt them personally more than he helped them with a 30-point margin.
And the general approval of the president’s economic management has been low for some time. A Reuters IPSOS poll issued on March 31 fell to 37%, the lowest score ever.
If Trump remains on the course, his approval rating could still be lower, putting the vulnerable grip of Republicans in the U.S. House and possibly the Senate, experts said.
“Those reasons make us feel that China is not forced to rush to the negotiation table to secure a trade deal. It will likely fall on Trump.”
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