U.S. President Donald Trump exacerbated Chinese goods after he suspended his “reciprocal tariffs” on major U.S. trading partners on April 9. The trade tax on most U.S. imports from China have climbed to 145%. Beijing retaliates with its own duties, 125% of American goods.
Trump has long accused China of using the United States for trade and returning its tariffs to domestic manufacturing as needed and returning it to the United States. He also wants to use tariffs to raise tax cuts. Most economists remain skeptical Trump will achieve his goal.
For now, the United States and China are locked in a high-risk chicken fight. The world is waiting to see which countries will surrender and which countries will stay. When Trump approached his first 100 days for the second time, this is where the tariff war with China is:
Trump has recently played the possibility of a trade deal with China. Last week, the U.S. president said his tariffs on China would "sharply drop" in the near future.
"We will reach a fair deal with China," Trump told reporters on April 23. He also said that his administration "actively" negotiated with China without elaborating on it.
However, on April 24, China's Ministry of Commerce rejected President Trump's remarks, saying there was no negotiation between the two countries.
"Any claim on progress in China-U.S. economic and trade negotiations is groundless and has no factual basis," he said.
While he insists that Beijing will not hide from any economic blow from Washington, he also said the door is "open" to negotiate.
Last week, Reuters reported that China was evaluating exemptions for U.S. imports, a list of up to 131 products.
Beijing has not issued any public statement on this issue.
Trump introduced his extensive tariffs to China less than three weeks ago. Until later this year, the impact of U.S. businesses will not be fully felt. Nevertheless, the warning signal has flashed red.
U.S. Department of Agriculture data shows that soybean exports, the largest farm exports in the United States, fell sharply between April 11 and 17, the first full week since Trump's China tariff announcement.
By April 17, net sales of U.S. soybeans fell 50% compared to last week. This is driven by 67% of weekly soybean exports to China, and until recently, it was the largest export destination in the United States.
According to Piergiuseppe Fortunato, an adjunct professor of economics at the University of Neuchatel in Switzerland, “China’s retaliatory tariffs will severely hit American farmers. Some may go bankrupt.” He added that all sectors that are exposed to China will be under pressure.
In 2023, the United States exported approximately $15 billion in oil, gas and coal to China. Losing this market will hit U.S. energy companies.
Freight transportation has plummeted since Trump's tariff war began. According to Linerlytica, a shipping data provider, U.S. freight bookings fell by 30% to 60% in April.
The sharp decline in transportation from the U.S. third largest trading partner (after Canada and Mexico) has not yet been felt. However, in May, thousands of companies will need to restock.
Retail giants Walmart and Target told Trump at a meeting last week that shoppers are likely to see empty shelves and higher prices next month, according to Bloomberg News. They also warned that the supply shock could extend into Christmas.
Electronic equipment such as TVs and washing machines were imported from China in 2022 by 46.4%. The United States also imports many clothing and pharmaceutical ingredients from China. The prices of these commodities will increase from next month.
On April 22, the IMF raised its inflation forecast to 3% in 2025, due to tariffs - a total of 1 percentage point higher than in January. Lenders have also lowered U.S. economic growth forecasts and raised expectations that the U.S. will fall into a recession this year.
Despite growing tensions between the United States and China, Washington and Beijing remain major trading partners.
According to the Office of the U.S. Trade Representative, the United States imported $438.9 billion in Chinese goods last year.
This is equivalent to about 3% of China's total economic output, which is still largely dependent on exports.
Goldman Sachs said in a report shared with customers this month that Trump's tariffs are expected to delay China's GDP by as much as 2.4 percentage points.
Senior Chinese officials said the country could do this without U.S. farms and energy imports and promised to achieve a 5% GDP growth target this year.
Zhao Chenxin, vice chairman of the National Development and Reform Commission, said that along with non-U.S. imports, domestic farms and energy production, it is enough to meet demand.
"Even if we don't buy feed cereals and oil seeds from the United States, it will not have much impact on our country's grain supply," Zhao said Monday.
He also pointed out that if the company stops importing U.S. fossil fuels, the impact on China's energy supply will be limited.
Experts say that in some ways, China has been preparing for the crisis.
"The United States is one of China's largest export markets, so tariffs will slow GDP growth. However, Beijing has played a great role when it began diversifying its imports from the United States during the first Trump trade war in 2018."
He also noted: "The United States relies on 60% of China's key mineral imports for use from clean energy to military technology. The opposite process does not exist at all, so the United States is more vulnerable."
Trump has little secret for his desire to include American allies in the trade war. The government said its goal is to reach a free trade agreement with the EU, the UK and Japan.
More generally, the report shows that Washington requires trading partners to abandon economic ties with China as a prerequisite for ensuring Trump’s “reciprocal” tariff relief.
However, U.S. allies seem to be largely opposed to any economic showdown with China. Last week, the European Commission said it had no intention of "decoupling" from China.
Elsewhere, British Chancellor Rachel Reeves recently told the Telegraph: "China is the second largest economy in the world and I think it's very stupid not to participate."
Many countries cannot give up their trade relations with Beijing. Especially the EU, there is a huge trade deficit with China. Cutting off access to Chinese goods – including consumer products and industry input – will harm its already sluggish economy.
In the entire developing countries, China's trade role is equally critical. About a quarter of Bangladesh and Cambodia's imports come from China. Nigeria and Saudi Arabia also rely on Beijing's imports of goods.
"It's hard to see why the country is destroying its own corporate interests in order to reduce the U.S.-China trade deficit," Fortunato said. "At this point, I think Trump is already shortsighted and may be forced to blink first to lower tariffs with China."
The Communist Party of China does not have to worry about the next election cycle. Trump's Republican Party does, so Beijing has a political upper hand in Trump's trade war. In short, it has more time on its side.
For Trump's party, his saber rattles seemed politically expensive. A new economist - Yugov poll shows that Americans report on Trump's economic behavior hurts them personally more than the 30-point difference.
Public approval of the president's economic management has been low for some time: in the Reuters-Ipsos poll released on March 31, this has dropped to 37%, the lowest ever in his survey.
Experts say that if Trump sticks to the course, his approval rating may still decline, which hurts Republicans’ fragile grip on the U.S. House and the Senate.
"For these reasons, China has not been forced to get a trade deal. This could fall on Trump," Fortunato said.