(Source: Caixin.com, 2024-11-27)
On the basis of the declared 10% tariff on China, Trump’s tariffs will continue to be increased in the future, and they will be increased in a focused manner; at the same time, canceling China’s most-favored-nation status may also become an option.
On October 25, 2024 local time, Trump attended a campaign rally in Michigan, USA.
Picture: Visual China
Before taking office officially, US President-elect Trump has already wielded the first wave of tariffs. According to Trump’s announcement on his own social media website Truth on November 25 Social issued a statement stating that he will impose a 25% tariff on all goods from Mexico and Canada entering the United States on January 20, 2025, the first day he returns to the White House. At the same time, he also threatened to impose an additional 10% tariff on all goods exported from China to the United States on top of the tariffs already imposed by the United States. What does this menacing tariff threat mean? It reveals Trump’s “w88 war” thinking.
“Trump actually has no idea how much the tariffs will be increased and why they will be increased to this number.”Tu Xinquan, President of China WTO Research Institute, w88 casinoIn an interview with Caixin, he pointed out that although Trump claimed to raise tariffs on China to 60% during the campaign, and now threatens to impose an additional 10% tariff on all Chinese goods after taking office, the outside world does not need to be too entangled in the specific tariff figures given by Trump. “In his last term, he also threatened to impose 45% tariffs on China, but in the end it was not raised to such a high level.”
According to calculations by Bloomberg, the Office of the United States w88 Representative, the World w88 Organization (WTO), the Peterson Institute for International Economics (PIIE) and other institutions, the average tariff rate on China’s exports to the United States rose from 3.1% when the Sino-US w88 war broke out in early 2018 to about 20% in early 2020, and has continued to this day.Tu Xinquanpointed out that if a 10% tariff is added to this basis, "it is actually not low", and the 20% base is just an average tariff, and the base may be higher for goods in some fields.
Tu XinquanWe judge that in Trump’s second term, he may hope to add some taxes to Chinese goods in all fields, but the general tax increase cannot be too high, because some Chinese goods account for too high a proportion of U.S. imports, and tax increases will also have a certain negative impact on the United States. In addition, Trump may also consider the impact on US inflation and first propose an additional 10% tariff. "But for him, this tax rate is definitely not enough. He will continue to increase it in the future, and he will increase it in a focused manner."
In the last term, Trump successively imposed tariffs on Chinese imports in accordance with Sections 201, 232 and 301 of the US w88 Act. Among them, the "301 investigation" specifically targeting China imposed tariffs of 7.5% to 25% on approximately US$370 billion worth of Chinese goods exported to the United States, accounting for 68.7% of the US imports to China in 2018. The commodities involved include not only technology-intensive commodities such as mechanical and electrical products, mechanical equipment, and precision equipment, but also labor-intensive commodities such as clothing, toys, and furniture. The Biden administration that took office in January 2021 not only retained Trump's tariffs on China, but also further imposed additional tariffs in May 2024 on US$18 billion in imported goods from China, including electric vehicles, semiconductors, batteries, and critical minerals.
atTu XinquanIt seems that no matter Biden or Trump, the purpose of the tariff war against China is to promote Sino-US decoupling. However, considering that decoupling also has costs and harms to the United States, the pace and choice of policy tools still need to be weighed.
For Trump, the purpose of imposing additional tariffs is to cut off the United States' dependence on key Chinese products; this includes not only key parts and equipment, but also some mid- to high-end consumer goods that can "allow Americans to achieve a better standard of living"; for the latter, "maybe 20% or even 30% may not be enough." One of the main arguments used by the Trump team to defend the tariffs is that U.S. inflation did not rise during Trump's first term in imposing tariffs. However, starting from the last year of Trump's first term, that is, 2020, the impact of the COVID-19 epidemic on inflation has gradually fermented under Biden's term: on the one hand, it is the pressure of the epidemic on the supply chain that has caused global prices to rise; on the other hand, the "helicopter money" epidemic relief and economic stimulus measures adopted by the United States have also pushed up inflation; the combination of the two has made U.S. inflation soar. Subsequently, multiple geopolitical conflicts broke out one after another, and international energy prices continued to rise. The need to control inflation in the United States has led to direct consequences such as the Federal Reserve's continuous interest rate hikes, illegal immigration, and the rapid expansion of the national debt.
In response to this economic situation that American voters are worried about, Trump announced his own policy plan during the campaign: combating illegal immigration, cutting taxes, reducing government debt, and relaxing industry regulations. Between rising labor costs and reduced domestic taxes, what is being used to fill the funding gap is the comprehensive tariff plan, which is regarded as the core element of Trump's economic policy.
During the campaign, Trump said that he was considering charging 10% or 20% tariffs on all imported goods from the United States, and increasing tariffs on Chinese goods by at least 60%. Eventually, tariffs would completely replace domestic income taxes to make up for the financial gap, support U.S. fiscal revenue, reverse the w88 deficit, and protect U.S. domestic industries.
However, American economists who oppose the tariff policy point out that the economic and inflationary costs caused by tariffs are very large, and these costs are mainly borne by consumers and businesses; at the same time, the additional tariffs are basically unable to achieve its preset goals, such as reducing the w88 deficit and revitalizing the manufacturing industry. Calculations by Mary Amiti, assistant vice president of the New York Fed, and Stephen Redding, professor of economics at Princeton University, show that the price increase of U.S. imported goods caused by Trump’s last round of tariffs is almost equal to the increase in tariffs.
In the Trump team and the Republican Party, there are also proposals to cancel China’s “most favored nation status”, that is, permanent normal w88 relations status (PNTR). Rubio, a Cuban-born federal senator from Florida who was just selected by Trump as the Secretary of State in the new administration, participated in promoting the bill to cancel China’s PNTR qualification in Congress in September 2024. This is also the third time since 2022 that US politicians have proposed canceling China’s PNTR qualifications.
The most-favored-nation treatment, which is the basis of the WTO, refers to the w88 preferences offered by any WTO member to another member and must also be provided to all WTO members. In other words, in w88 among WTO members, any member enjoys the lowest tariff rate set by another member on a certain product. This preferential w88 treatment is called "most-favored nation treatment" in the WTO, and is officially called "permanent normal w88 relations" (PNTR) in the United States.
U.S. w88 laws stipulate that "non-market economy countries" cannot automatically enjoy "normal w88 relations" with the United States and need to be reviewed by Congress every year. Before 1989, China's censorship basically passed smoothly. In the late 1990s, the U.S. political arena launched a heated debate that lasted for many years around the U.S.’s economic and w88 opening and cooperation direction with China. As the most critical step in China's WTO accession process, the U.S. Congress voted to grant China PNTR status in 2000, making China's normal trading partnership "permanent" and no longer requiring annual review and renewal.
Tu Xinquanbelieves that the current discussion on the United States’ cancellation of China’s “most-favored-nation status” still needs to be viewed from two perspectives: one possibility is to cancel China’s “permanent” qualification for normal w88 relations, that is, to restore the state of annual review before 2000, or to set conditions for when to resume year-to-year review. The impact may only increase the uncertainty of Sino-US w88. Another possibility is to cancel the normal w88 relations that China enjoys, which means that China will be classified into the same category as North Korea, Cuba, and Russia, and its impact will be more widespread.
Currently, the United States imposes a first-category tariff rate on partner countries with "normal w88 relations", with an average rate of 2.3%. The United States imposes a second category of tariff rates, also known as Smoot Hawley tariffs, on countries that do not enjoy "normal w88 relations", with an average tax rate of 32.2%.
According to PIIE research, if the United States cancels China's PNTR, the hit to China's and the United States' GDP and job markets will last for many years. China is likely to devalue its currency to cushion the blow. Depending on China’s response, China’s GDP growth rate may be reduced by 0.3 to 1.5 percentage points in 2025. The impact on U.S. GDP is expected to begin in 2026. Depending on the strength of China’s possible countermeasures, U.S. GDP growth in 2026 may be wiped out by 0.1 to 0.2 percentage points.
“The WTO’s most-favored-nation status is the basis of economic relations between the two countries. Canceling this treatment is equivalent to severing economic relations and is an extremely serious and symbolic move.”Tu XinquanI believe that considering that Trump is not yet completely ready to completely decouple from China, he may still weigh the above two options.
Marcus Noland, executive vice president of PIIE, pointed out that Trump’s previous tariffs on China have been largely based on the aforementioned second-category tariffs imposed by the United States on countries that do not enjoy “normal w88 relations.” From this perspective, the “normal w88 relations” between China and the United States have actually partially collapsed, and China has also lost some of the so-called WTO most-favored-nation w88 preferences. Nolan believes that the harm caused by Trump’s w88 measures against China so far is roughly equivalent to one-third of the expected consequences of the United States canceling China’s PNTR treatment.
Tu Xinquanalso pointed out that Trump’s tariffs on China have actually caused great damage to China’s so-called WTO most-favored-nation status. This w88 preference only exists in name. He also pointed out that the United States' cancellation of China's PNTR treatment and its continued imposition of tariffs on China are not directly related and are not mutually exclusive; because whether Trump will increase taxes or not depends entirely on his own will, "the United States no longer cares about any international law." But in Trump's toolbox, he believes that tariffs may still be the top priority.
When announcing an additional 10% tariff on Chinese goods on November 25, Trump also unexpectedly announced that he would impose a 25% tariff on goods from his two major trading partners, Mexico and Canada, on his first day in office. In this regard,Tu Xinquanpointed out that Trump’s approach to tariffs on China and other trading partners is different. “The purpose of raising taxes on China is decoupling, while the purpose of imposing tariffs on other countries is to balance w88.” Especially in the view of Trump and his supporters, in the past eight years, not only has China-US w88 failed to achieve the "balance" sought by the United States under tariff policies, but China's rapid development momentum has not been curbed, which has made the United States increasingly believe that China will pose a "threat" to U.S. interests.
Tu Xinquanbelieves that Trump’s tariff threats to Canada and Mexico may not actually be implemented and may still be used as a bargaining chip in future negotiations. It was during Trump’s first term that the United States, Canada and Mexico negotiated the United States-Mexico-Canada w88 Agreement (USMCA), which replaced the previous North American Free w88 Agreement (NAFTA). Trump has said he wants to renegotiate the USMCA based on provisions of the USMCA that are due to be reviewed in 2026.
PIIE’s research points out that the “w88 war” launched by Trump in his first term actually only reduced China’s total imports of goods from the United States, which is exactly the opposite of Trump’s original intention. The Bloomberg report also pointed out that during the last round of w88 war between China and the United States, the U.S. w88 deficit with China actually expanded, while Chinese exporters did not seek to reduce prices under the pressure of tariffs, which means that it is mainly American companies and consumers who pay the cost of tariffs.
Research results released by economists Mary Lovely and Kimberly Claussing in August 2024 show that if Trump’s tariff promises during the campaign are fully implemented, that is, a 60% tariff on Chinese goods and a 20% general tariff on goods from all other countries in the world, this will cost an average American family $2,600 per year.
Zhao Hai, director of the International Political Research Department of the National Global Strategy Think Tank of the Chinese Academy of Social Sciences, analyzed Caixin that hawks such as Trump’s foreign affairs and national security adviser regard decoupling from China as the core goal of imposing tariffs. He believes that as long as China and the United States maintain contact in the fields of economy, w88, science and technology, and humanities, this situation will be more beneficial to China. But within the Trump team, there are still different views on how to use tariff tools. For example, although Wall Street-born finance minister nominee Scott Bessent firmly supports Trump’s tariff agenda, he is also open to using tariffs as a negotiating tool.
As for Trump himself, Zhao Hai believes that Trump does not just regard tariffs as a tool to achieve Sino-US decoupling. The ultimate goal of his tariff agenda is still to fully replace income tax and become the main part of government revenue. He believes that Trump does not have ideological hostility towards China, but sees China as an obstacle on the road to achieving the goal of "Making America Great Again (MAGA)". This means that Trump does not really reject negotiations with China. “As long as China does not pose a threat to the prospects of MAGA, then Trump is willing to make deals with China.”
Tu XinquanI also believe that Trump, who calls himself a "deal master", will still be willing to negotiate with China, but he may not be willing to use traditional technocratic negotiation methods.
He also pointed out that for Trump, tariff measures are a means of coercion for most trading partners in order to obtain some negotiation benefits, and generally speaking, smaller countries will tend to yield to some of the United States' demands, thus possibly avoiding the outbreak of a full-scale w88 war. But at present, in addition to the inevitable escalation of the tariff war between China and the United States, it remains to be seen how the EU will respond to the United States' punitive tariff measures. The possibility of a certain degree of tariff war between the United States and Europe cannot be ruled out.
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