It’s beginning.
US President Donald Trump’s “mutual” trade tariffs began on Wednesday at 12:01am (04:01 GMT). And no country is now worse than China, which is effectively facing 104% collection of products sold to the US.
Even if Washington moves to begin negotiations with other trading partners targeting tariffs, Beijing’s new taxation means that anything the US imports from China will more than double what it did two months ago. In response, China quickly raised US tariffs to 84%.
Stock markets have plummeted since last week’s announcement of US tariffs in dozens of countries as investors were supported by the fallout from the current World Trade War.
On his part, Trump has long accused other countries, particularly China, of exploiting the United States through trade, reviving domestic manufacturing and casting protectionist agendas as needed to reshuffle American jobs.
What about the US-China tariff situation?
On February 3rd, Trump imposed a 10% tariff on all goods from China, in addition to the various tariffs imposed by the first Trump administration of 2017-2021 and the administration of former President Joe Biden from 2021 to 2025.
Then, on March 5, Trump doubled China’s import rate to 20%. On April 2nd, he raised another 34%. In total, we have accumulated up to 54%.
Last Friday, April 4, China announced a 34% mutual tariff on US imports.
Trump has raised the temperature once again by threatening more tariffs, unless Beijing withdraws taxes on US goods.
“If China does not exceed long-term trade abuse by 34% by tomorrow, April 8, 2025, the US will impose additional tariffs on 50% of China on April 9,” Trump said Monday on True Social Platform.
When time was ticking, Trump remained certain that Beijing would succumb. “China also wants to make a bad deal, but they don’t know how to start it,” the US president wrote in a social media post. “We’re waiting for their phone call. It’s going to happen!”
I didn’t do that. Instead, Beijing raised tariffs on US goods to 84% on Wednesday.
What did China say in response to Trump’s tariffs?
China’s Commerce Ministry, which announced its latest tariffs on US exports on April 9, said Beijing “has the company’s will and abundant means to fight with the necessary measures.”
“History and facts prove that an increase in US tariffs does not resolve its own problems,” the policy statement said.
“Instead, it will cause rapid fluctuations in financial markets, boost US inflationary pressures, weaken US industrial bases, and increase the risk of a US economic recession.
In a statement the day before, on April 8, the Commerce Department also gave a militant overture, saying Washington’s actions were “completely unfounded” and a form of economic “bullying.”
Beijing defended mutual tariffs and said they aimed at protecting China’s “sovereignty, security and development interests” and to maintain a balanced international trade market.
Elsewhere, Lin Jiang, a spokesman for China’s Ministry of Foreign Affairs, said, “We Chinese are not troublemakers, but we shouldn’t have trouble coming.”
How will tariffs affect China’s economy?
Despite growing tensions between the US and China, Washington and Beijing remain major trading partners.
The US imported $438.9 billion into Chinese goods last year, according to the US Trade Representative.
This represents about 3% of China’s gross domestic product (GDP), which relies heavily on exports.
In a report shared with clients on Tuesday, Goldman Sachs said he expects Trump’s latest tariffs to cut China’s GDP by up to 2.4%.
Investment banks are forecasting growth of 4.5% this year, and concerns about bypassing US tariffs – a proven tactic to reroute exports through countries like Vietnam and Thailand – will become less effective as Trump is setting a global trade barrier.
That 4.5% is lower than the official Chinese government growth target of 5% in 2025.
UBS analysts are even more pessimistic. They say Trump’s tariff hike could reduce China’s economic growth to just 4% in 2025. [i.e. extra public investment].
China’s economy is already growing at a slower pace than when Trump first took office. The latest trade war comes as China is struggling with deflation, a crisis-hitting real estate market and rising debt levels.
When Trump launched its first trade war with China in 2018, Beijing’s official GDP growth was 6.6%.
Still, for Jayati Ghosh, a professor of economics at the University of Massachusetts Amherst University, China is still “more prepared than most countries” to handle fallout from Trump’s trade salvo.
How has Beijing responded so far?
Katrinayu, Beijing correspondent for Al Jazeera, says Chinese officials are working to prevent shocks in the stock market.
“The government has the ability to intervene strongly,” Yu said.
On Tuesday, Chinese Prime Minister Li Qiang said the government could “full hedge against the unfavorable external influence.”
On the same day, several public investment companies such as Chengtong and Huijin vowed to increase stock investments and increase sales in the STEM financial market.
Yu pointed out that Chinese stock exchanges perform better than elsewhere in Asia.
Shanghai’s SSE Composite Index posted a profit of 1.1% on Wednesday, while Shenzhen SE Composite rose 2.2%. Meanwhile, Japan’s Nikkei Index fell 3.9%.
” [Chinese] The government is really trying to stabilize the stock market. It seems to be working so far, but the investors here… some of them are still very unsettling,” Yu said.
What will China do next?
To mitigate the impact from tariffs, Beijing will likely focus on domestic stimulation and ties with trading partners to achieve its growth target of “about 5%,” said economics professor Ghosh.
“We hope for further reductions in China [already] Low interest rates and more borrowing from local governments and supporting affected export workers,” she told Al Jazeera.
Ghosh suggested that China will “quietly” promote exports to trading partners, particularly in the Global South, through measures such as “finances and debt relief.”
She also said that China’s central bank would allow the yuan to depreciate, which could lower export prices and offset some of the losses caused by tariffs.
Ghosh said China’s $20 trillion economy should be able to “absorb” the blow from US tariffs, but some economists have expressed concern about Beijing’s accounting position.
On April 3, Fitch rating agency Fitch downgraded China’s sovereign credit rating and prepared policymakers to protect the economy from rising tariffs, citing the rapidly rising risks to government debt and public finances.
But for Gauche, “There’s a Western trend that sees the imminent collapse of the Chinese economy. I’m far more concerned about the US economy,” she said.
Source link
