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Donald Trump hiked China tariffs to 125 per cent, suggesting he completed an unfinished business from his first term. To his earlier tariffs, China hit back with 84 per cent retaliatory tariffs.
Xi Jinping and Donald Trump (Getty Image)
Donald Trump abruptly paused tariffs on most countries but upped the ante on a brutal trade war with superpower rival China.
Beijing hit back with retaliatory tariffs of 84 percent on US imports, which came into effect at 12.01 pm (0401 GMT) on Thursday, the latest salvo in an escalating standoff between the world’s two largest economies.
In his response to questions on why he raised China tariffs to an eye-watering rate of 125 per cent, Trump said the move was because Beijing retaliated with tariffs on US goods, a move he described as showing a “lack of respect”.
However, a deeper dive into the move suggests Trump has, indeed, finished an incomplete job he took up during his first term at the White House, and in fact, the US President also said, “We didn’t have the time to do the right thing, which we’re doing now.”
According to a report with BBC, China, in 2012, increased trade with the United States, and that resulted in boosting the global growth of China, thus providing an endless supply of cheap goods.
It also helped the country prepare new factory workers to work in accordance with the global supply chains, and providing lucrative opportunities to multinational corporations.
Within a few years, China surpassed the United States to become the world’s biggest market for Rolls Royce, General Motors and Volkswagen, the report claimed.
This, in turn, allowed the Chinese to plan a political reform and helping their country to transition into a consumer society. However, as China saw the growth of its ruling Communist Party, it planned on to become more dominant.
In the latest, China’s policy blueprint ‘Made In China 2025’, set out a huge state-backed vision of becoming a global leader in a number of key manufacturing sectors.
And now, China produces 60 per cent of the world’s electric cars – a large proportion of them made by its own homegrown brands – and 80 per cent of the batteries that power them, claimed the report.
So, now Trump is back, with this tit-for-tat escalation on levies.
According to the report, Trump’s first-term trade war broke the mould and shattered the consensus. His successor, President Joe Biden, kept much of his tariffs on China in place.
SO WHAT NEXT?
It would be interesting to watch if China now takes up to negotiate with the United States, or completely overhauls its export-driven economic model.
China’s vision of its economic strength – one based on strong exports and a tightly protected domestic market – is now closely bound up with its idea of national rejuvenation and the supremacy of its one-party system.
Its tight control over the information sphere means it will be unlikely to drop its barriers to American technology companies, for example, the report says.
However, Beijing may decide not to negotiate if it believes the United States believes in free trade, more so because Donald Trump talks about the benefit of a protectionist barrier for America, which, China may believe to be the primary purpose of imposing tariffs.
How the ongoing trade war between the two countries shape up largely depends on how China reacts to the hiked tariff.
Meanwhile, US Treasury Secretary Bessent, on being asked about removing Chinese stocks from US exchanges, said, “everything is on the table”.
Trump also predicted that trade deals will be made with all countries, including China, which has for now refused to roll back retaliatory tariffs on US goods.
