US Reciprocal Tariffs on China and Global Trade

Global markets and businesses are revising their trade strategies in response to recent announcements from US President Donald Trump regarding new tariffs on major trading partners. These policies set a baseline tariff of 10 per cent on all goods entering the United States, with some imports facing a maximum rate exceeding 50 per cent. This shift marks a major change in global trade dynamics, with the US aiming to address long-standing trade imbalances and practices perceived as unfair.

The 10 per cent universal tariff is set to take effect on April 5, with additional tariffs targeting specific countries, including reciprocal tariffs, beginning on April 9. Among the affected countries, the European Union will face a 20 per cent tariff, while Mexico and Canada will continue to be subject to the 25 per cent tariffs introduced earlier this year.

The global response has been swift, with significant volatility in Asian markets and growing uncertainty about the long-term impact on international trade. As the situation develops, countries are evaluating their next steps in response to this unprecedented shift in US trade policy.

The United States has also escalated its trade relations with China, increasing tariffs on Chinese imports to over 65 per cent. This escalation is part of a broader strategy to address trade imbalances, reduce reliance on Chinese goods, and stimulate domestic production. The new 34 per cent tariff is layered on top of previous levies, including the 20 per cent tariff introduced earlier this year, and other measures enacted under Section 301 of the US trade law. According to analysts at Capital Economics, the average US tariff rate on China is approaching 70 per cent.

In response, the Chinese Ministry of Commerce issued a strong statement condemning the tariffs, warning of negative consequences for global economic stability and emphasizing that protectionist measures tend to be counterproductive in the long term. Beijing has made it clear that it will take countermeasures to protect its own economic interests, raising concerns about further escalation in the trade war.

Experts suggest that China may respond with a variety of strategies, including reciprocal tariffs, currency devaluation, and restrictions on exports of rare earth materials, which are crucial for US industries. Analysts warn that these new, more severe measures could have a greater impact on the Chinese economy, especially in terms of its trade surplus with the US.

In addition to the increased tariffs, the US has decided to close the "de minimis" loophole, which previously allowed goods valued under USD 800 to enter the US duty-free. This change, effective May 2, will directly affect Chinese e-commerce giants like Shein and Temu, which have relied on this exemption to facilitate quick and cost-effective shipments to US consumers.

Analysts predict that Chinese exports to the US could fall by as much as 80 per cent, potentially reducing China's overall economic growth by up to two percentage points. In response, China may need to implement additional stimulus measures to counter the economic slowdown.

Economists suggest that reversing the tariffs would likely require China to make significant concessions, as the US aims to protect key industries and boost domestic production. As a result, Beijing may adopt a more strategic approach, using economic policies and targeted restrictions to navigate this new phase of the trade conflict.

This latest round of tariff increases marks a critical juncture in the US-China trade war, reshaping global supply chains and economic priorities. As Beijing considers its response and Washington reinforces its protective measures, the evolving dynamics could shape international trade for years, challenging the adaptability of both economies.