Analysis: How Trump’s New Tariff Hikes Will Affect Sino-U.S. Trade

Donald Trump's recent trade policy decisions have escalated tensions with China, as he imposed an additional 10% tariff on Chinese imports at the end of February 2024, following a broad 10% tariff increase earlier in the month. These moves have raised concerns regarding their potential impact on China's exports to the United States and the broader implications for global trade dynamics [para. 1][para. 2].

On February 27, Trump further announced a 25% tariff on Canadian and Mexican imports, effective March 4, alongside the additional 10% duty on Chinese goods. This contradicted an earlier statement that indicated the extra duties would not be imposed until April 2 [para. 3]. Analysts noted that these tariffs would raise the comprehensive tariff rate on U.S. imports of taxable Chinese goods from 20% to 40% [para. 4].

In 2024, China's exports to the U.S. reached $524.7 billion, a 4.9% year-on-year increase, with the U.S. remaining China's largest export market, well ahead of Japan [para. 5]. Gao Shiwang from the China Chamber of Commerce emphasized the U.S.'s indispensable role in the market due to its economic scale and demand [para. 6]. Ni Xiaorong of Kuehne+Nagel highlighted the widespread implications of shifting U.S. trade policies on global trade and the shipping industry, noting uncertainties surrounding U.S. policies toward China affecting the structure of Sino-U.S. supply chains [para. 7].

Gao expressed concern over the additional tariffs' potential impact on corporate expectations, noting that Sino-U.S. trade in machinery and electronics was previously stable. With Trump's election victory, corporate expectations shifted significantly, and a sharp tariff increase could disrupt a previously stable outlook [para. 8]. Among China's significant exports to the U.S., machinery and electronics account for the largest share, comprising 41.6% of total exports [para. 9].

Gao noted that while an initial 10% tariff could be managed with cost-sharing and supply chain adjustments, the additional 10% and future uncertainties severely affect corporate confidence in Sino-U.S. trade [para. 10]. The initial tariff was typically split evenly between Chinese exporters and U.S. importers, but further tariff increases forced Chinese exporters to pass the burden to U.S. importers and others in the supply chain [para. 11].

A kitchenware exporter in Ningbo reported that while U.S. clients are demanding 5% price cuts due to tariffs, he can only offer 2% to 3%. To cope, he is planning to set up assembly operations in Southeast Asia [para. 12]. Analysts suggested a short-term rush to stockpile goods might occur, with early shipment requests becoming commonplace [para. 13]. Despite ample shipping capacity due to previous stockpiling waves, the urgency to stockpile is less pronounced this time due to the rushed tariff rollout and supply chain shifts overseas [para. 14][para. 15].

Ni highlighted the uncertainty introduced by shifting tariff policies, potentially leading to stricter customs procedures and increased operational costs [para. 16]. The impact varies across businesses, with larger firms relying on overseas factories, while smaller enterprises might risk losing customers unless they improve product design and value [para. 17]. Trump might impose additional 10% monthly tariffs on Chinese exports, potentially driving up product prices and affecting shipping rates [para. 18]. Tariffs on Mexico could disrupt Chinese export flows due to Mexico's role as a gateway to the North American market [para. 21][para. 22].

Overall, Trump's trade policy potentially targets more countries with "reciprocal tariffs," affecting the global trade landscape and China's regional relocation to Southeast Asia may benefir from it, albeit with looming U.S. scrutiny [para. 27].