US China Trade: A Tariff Twist?
Introduction
As global markets brace for the fallout of US tariffs, China’s unexpected maneuvering has redrawn the trade landscape, forcing investors and policymakers to reevaluate their positions. On Tuesday, January 21, CN Wire reported: “Trump: We are thinking in terms of 25% tariffs on Mexico and Canada. I think we will do it on Feb 1.” On the campaign trail, President Trump had threatened 60% tariffs on Chinese goods. However, the US President appears to have taken a different tack on China.
Trump’s Approach to China
Before his inauguration, Trump had lowered potential tariffs on Chinese goods to 10% and appointed former US Senator David Perdue as the US Ambassador to China. Perdue, with his experience living in Hong Kong and working in China, is seen as a bridge to improve bilateral relations. Trump’s call with China’s Premier, the silence on tariffs, and David Perdue’s appointment could ease concerns about a US-China trade war. On Friday, January 17, President Donald Trump shared news of a call with China’s Premier Xi Jinping, saying, “I just spoke to Chairman Xi Jinping of China. The call was a very good one for both China and the U.S.A. It is my expectation that we will solve many problems together, and starting immediately.”
Expert Views on US Tariff Stance on China
Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented: “Tariff Man forgot his tariffs! Trump clearly looking for a grand bargain with China to which nobody else is invited. Europe, South Korea, and Japan losers but Mexico probably the biggest as the border and deportations are the highlight of his inauguration!”
Economic Implications of Improved Relations
Improving US-China relations will influence China’s economic outlook. China’s economy expanded by 5.4% year-on-year in Q4 2024, accelerating from growth of 4.6% in Q3 2024. Front-loading ahead of Trump’s inauguration and potential tariffs may have contributed to Q4’s economic rebound. China’s exports surged by 10.7% year-on-year in December, up from 6.7% in November, with imports rebounding.
Market Reactions
Hopes for improving US-China relations and Beijing’s stimulus measures boosted demand for Hong Kong-listed stocks. However, uncertainty about Trump’s longer-term tariff goals and Beijing’s stimulus plans pressured Mainland China’s equity markets. The CSI 300 and Shanghai Composite dropped by 0.16% and 0.35%, respectively.
Effects on Me
The potential for improving US-China relations could lead to greater stability in the global market, which may positively impact my investment portfolio. It may also result in more favorable trade conditions for businesses operating in both countries, potentially benefiting my job or business.
Effects on the World
A more harmonious relationship between the US and China could have far-reaching effects on the world economy. Improved trade relations between the two economic powerhouses could lead to increased global trade and economic growth. It may also help alleviate tensions in other regions that have been affected by the US-China trade conflict.
Conclusion
In conclusion, the evolving US-China trade dynamics present both challenges and opportunities for the global economy. As policymakers navigate this complex landscape, it is crucial for investors to stay informed and adapt their strategies accordingly to capitalize on emerging trends and mitigate risks.
