Caixin Explains: Impacts of Trump’s Global Tariff War and What Comes Next

[para. 1] President Donald Trump has intensified his global trade war by announcing significant tariffs that affect global trade. On April 2, he declared a national economic emergency, imposing reciprocal tariffs of at least 10% on nearly all imports to the United States, with higher rates ranging from 20% to 46% targeting countries deemed as major offenders, resulting in economic disruptions worldwide.

[para. 2] Specifically, China, one of the largest trading partners of the U.S., faces a new 34% levy on top of a previously existing 20% tariff. This results in a combined tariff of 54%. Analysts expect that this will have a more significant impact on China than the tariffs imposed during Trump's first term. This escalation could lead to a rise in the average U.S. tariff on Chinese goods to 65%-66%.

[para. 3] These tariffs are anticipated to shrink trade flows and negatively impact worldwide economic growth. Analysts like Tu Xinquan have criticized this policy shift towards "internal circulation," suggesting that it may lead to the U.S. becoming one of the most expensive places for production globally.

[para. 4] The tariffs are both broad and specific. A 10% tariff applies universally, while higher rates affect key countries based on factors like current trade policies considered unfair by the U.S. The European Union, Japan, South Korea, Vietnam, and Israel are among the targeted nations with specific tariff rates ranging from 17% to 49%.

[para. 5] The comprehensive tariff strategy far exceeds experts' expectations initially predicted by officials such as U.S. Treasury Secretary Scott Bessent. The measures are broader and apply much higher rates than initially anticipated, especially affecting Asian countries with large trade deficits with the United States.

[para. 6] The impact on China is profound, with an additional 34% tariff adding to the previous 20% rate, totaling 54%. This is expected to raise the U.S. tariff rate on Chinese exports significantly, affecting duties on a large volume of China's exports to the U.S.

[para. 7] Beyond tariffs, duty-free exemptions for China's small parcel exports will end, further increasing costs for China's export businesses. While some items like semiconductors and lumber products remain exempt, new stringent measures could influence future negotiations and economic strategies.

[para. 8] Experts, including economists from Nomura and Morgan Stanley, estimate that this escalated trade war will affect China's economy more harshly than the previous tariffs. Predictions reveal potential significant reductions in Chinese exports and GDP growth due to the new tariffs.

[para. 9] On a global scale, the OECD projects a slowdown in worldwide economic growth due to the uncertainty in U.S. tariff policies. Economies reliant on U.S. exports, particularly those dealing in low-end goods like Vietnam, face critical vulnerabilities.

[para. 10] Domestically, in the U.S., these tariffs are predicted to lead to recessionary pressures. They could increase production costs and create inflationary pressures, contradicting Trump's promise of making America wealthier.

[para. 11] Globally, reactions are emerging. The European Union and Canada are considering retaliatory tariffs, while regional trade partnerships are being strengthened to counteract the U.S. tariffs.

[para. 12] Moving forward, Trump may extend tariffs to other sectors and countries and is likely to continue utilizing tariffs to achieve broader strategic objectives, such as reshoring manufacturing and negotiating trade concessions from other countries.