94Ha Viewpoint
Nearly two months before his official inauguration, US President-elect Trump fired the first shot in a new round of tariff wars.
On Monday (November 25), Trump posted on the social media platform Truth Social he founded, threatening to swing the tariff “stick” at the two neighboring countries, imposing a 25% tariff on goods imported from Canada and Mexico until they crack down on drugs and cross-border immigration.
This move probably made Canada and Mexico a little confused, especially ally Canada. You should know that the United States is currently the largest trading partner of Canada and Mexico. Last year, more than 83% of Mexican exports and 75% of Canadian exports went to the United States. There is also a duty-free trade document “US-Mexico-Canada Agreement” signed by Trump himself and effective in 2020 between the three countries.
The tariff “stick” flying in all directions was not surprisingly swung at China. Trump said that after he took office, he would “impose an additional 10% tariff” on China, and accused Beijing of not taking strong enough measures to prevent illegal drugs from entering the United States from Mexico.
During the campaign, Trump threatened to impose a 60% tariff on products from China. Although these campaign declarations are often exaggerated, Trump, who firmly believes in the power of tariffs, has already drawn the bow and string before he officially took office. It seems that a tariff war is about to come.
In fact, the market began to make plans for a tariff war after Trump was elected. According to analysts surveyed by Bloomberg from the 15th to the 21st of this month, China’s export growth will climb to 7% in the last three months of this year, which is a further increase from the 5% growth in October before the US election. The reason behind this is that many foreign companies are worried about the trade war and are busy stockpiling in panic during the last window before Trump takes office.
Will the 10% tariff on China advocated by Trump this time be just a “starting price”? How high will the tariff be in the end?
One view is that Trump’s earlier threat of a 60% tariff was just a campaign rhetoric, which may not be realized in the end. Moreover, as a major importer of Chinese products, it is unrealistic for the United States to implement a 60% comprehensive tariff, and China cannot sit idly by. Therefore, Trump may just be bluffing and will not raise tariffs so high after taking office.
Some analysts also believe that the additional tariffs on China proposed by Trump starting from 10% may be influenced by Scott Bessent. This Wall Street elite who has just been nominated as Treasury Secretary is regarded as a more moderate force in the Trump cabinet team full of hawks. He has publicly expressed support for the imposition of tariffs on a wide range of imported products, but also advocated gradual implementation and believed that tariffs are “useful negotiating tools.”
As an experienced businessman who is well versed in negotiation skills, Trump used the threat of a 10% tariff as a starting point. It is not ruled out that he wanted to give Beijing a warning before taking office, or use this 10% as a bargaining chip to force Beijing to make more concessions at that time.
In a social media post, Trump mentioned that the 10% tariff related to drugs is “extra” and “beyond any other additional tariffs.” In other words, the first tariff item thrown out this time is drug prohibition, which requires China to pay for the drug problem in American society. Other trade-related tariffs, such as those targeting trade deficits and unfair competition caused by government subsidies, may belong to “any other additional tariffs” and are expected to follow.
Speaking of which, most of the cabinet team nominated by Trump are hawks, and their stance on China is tougher than Trump’s, which means that the new US government will not be soft on China. If Lighthizer, the chief architect of the tariff proposal during Trump’s first term, serves as the US trade representative again next, the ferocity of the Sino-US trade war 2.0 can be imagined. By then, Washington may no longer seek a balance in Sino-US trade, and may not hesitate to completely decouple and break the chain in order to suppress China’s development process.
The question now is how Beijing will respond? Liu Pengyu, a spokesman for the Chinese Embassy in the United States, responded to Trump’s social media post that Sino-US economic and trade cooperation is essentially mutually beneficial, and no one will win in a trade war or tariff war. The spokesperson of the Chinese Ministry of Foreign Affairs also remained restrained in his written response on Tuesday, only mentioning the issue of drug prohibition. So far, China has avoided making a tit-for-tat response on the issue of tariffs, indicating that Beijing does not want to break off relations with the Trump administration, which has not yet taken office.
However, China’s top leaders are believed to be preparing for the worst. Wang Shouwen, China’s international trade negotiator and vice minister of the Ministry of Commerce, reiterated at a briefing last week that China is building a new development pattern of dual circulation; the Ministry of Commerce also issued “Several Policy Measures on Promoting Stable Growth of Foreign Trade” last week to prepare for the global trade countercurrent. Faced with the possibility of further decoupling between China and the United States, China has also recently interacted intensively with traditional US allies and South American countries, and announced unilateral opening of visa-free entry to more countries. China’s top leaders also sent reassurances to Apple CEO Cook and other foreign companies to prepare for the radical policies that the Trump administration may adopt.
Right now, it is not just China that is holding its breath waiting for Washington to make a move. Faced with an era of “re-globalization,” the outside world is praying that China and the United States will not engage in a vicious fight. It also hopes that China will not be led astray by Trump and will expand its circle of friends as much as possible, working with like-minded partners to maintain global trade and multilateralism and fight protectionism and unilateralism. This is believed to be China’s most proactive approach to responding to Trump’s tariff “stick.”
