ince returning to the White House in January, US President Donald Trump has reignited and intensified trade conflicts with its major trade partners. Trump started with ordering 25 percent tariffs on goods from Mexico and Canada on February 1, pausing the tariffs two days later. In the meantime, Trump also imposed 20 percent additional tariffs on goods from China, which China responded with various countermeasures.
On March 26, the US imposed tariffs up to 25 percent on imports of vehicles and car parts, which analysts predict will deal a huge blow to automobile industries of its major allies, including the European Union, Japan and South Korea.
On April 2, Trump stunned the world by unveiling “Liberation Day” tariffs targeting nearly all trade partners. The two-tier tariffs include a 10 percent “baseline” tariff on imports from all countries, except Canada and Mexico, and higher country-specific “reciprocal” tariffs targeting about 60 nations, including China, which was subject to a 34 percent rate hike, set to take effect on April 9. Trump also threatened to hike tariffs further for any country who dare to retaliate.
The tariffs immediately unsettled markets domestically and internationally, as investors feared escalating trade wars would disrupt supply chains and dampen economic growth. On April 4, China announced to impose a reciprocal 34 percent tariff on all US goods. China also added 16 US companies to its export control list and 11 US companies on its unreliability list, and imposed export control measures on products of seven rare earth elements and magnets – materials vital to defense, energy, and automobile industries.
China’s swift countermeasures prompted further escalation from the Trump administration, which increased its tariff on Chinese imports for another 50 percentage points, bringing the final rate to 104 percent. China responded in kind, raising its retaliatory tariffs to 84 percent on the same day.
On April 10, in a dramatic policy reversal, Trump announced a 90-day pause on country-specific tariffs, citing an alleged cooperative response from its 75 trading partners, while the 10 percent “baseline” tariff came into effect. However, China was not only excluded from the tariff pause, but Trump declared to hike tariff on Chinese imports to 125 percent, which is on top of the 20 percent rate previously imposed on China, bringing the total tariff to 145 percent.
That same day, China mirrored the US’s escalation by raising its additional tariffs on US goods to 125 percent. China stated that it would ignore any further tariff hikes on Chinese goods and stop playing Trump’s “tariff numbers game,”given that the US exports to China are “commercially unviable” under current tariff levels.
On April 15, the White House released a fact sheet stating that some imports from China would face up to 245 percent tariffs, which includes a 125 percent “reciprocal” tariff, a 20 percent tariff for fentanyl crisis, and tariffs between 7.5 percent and 100 percent or some goods under Section 301.
While Trump had suggested repetitively that he is open for negotiation, he insisted that China needs to make the first move. By so far, China has made it clear that it will not yield on Trump pressure, and the Ministry of Commerce has maintained working-level communication with its US counterpart. On April 9, China released a white paper on bilateral trade relations with the US, criticizing that the US trade restriction measures are “in conflict with the principles of the market economy, run counter to multilateralism.” China has already filed a lawsuit against the US with the World Trade Organization’s (WTO) dispute settlement mechanism.
Meanwhile, there is no sign that the US could reach a deal with other major countries that have sought to negotiate with the US any time soon. The EU had earlier proposed a “zero-for-zero” tariff agreement, which Trump explicitly rejected on April 8. The EU later metered out it retaliatory 25 percent tariffs on US goods, only to suspend them after Trump’s decision to pause country-specifc tariffs.
On April 14, Japanese Prime Minister Shigeru Ishiba said that his country does not plan to make big concessions and will not rush to reach a deal in upcoming tariff negotiations with US.
As it is not clear when and how the US’s historical tariff war will end, the global economy faces mounting risks of recession, supply chain disruptions, and prolonged market instability. As the trade war escalates, the market is increasingly worried about both imminent and potential long-term damage to global economic prospect and order.
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