Donald Trump’s tariff announcement could lead to unrest in international trade relations – especially with China.
• Trump announces tariffs
• China’s reaction is initially calm
• Expert warns of calculated move by China
With his announcement that he would impose an additional tariff of ten percent on all Chinese goods on the first day in office of his presidency, Donald Trump once again held out the prospect of a momentous trade policy. However, the reaction from Beijing was more calm than originally expected.
China’s calculated counterattack: trade policy wisely?
Instead of a harsh response to Trump’s tariff announcement, China responded by extending tariff exemptions for certain US products until February. Included are, among other things, rare earths and nickel-cadmium batteries. This move could be a deliberate move to maintain China’s position as a major player in global trade, according to Wen-Ti Sung of the Antlantic Council’s Global China Hub: “This looks like a tactic to win the international game of narrative,” ABC quotes him in this context.
The challenges that an escalation will bring for both countries are likely to remain. Because: The USA remains China’s most important export market, which Trump is likely to use as leverage for his demands – especially in the fight against the illegal fentanyl trade, whose origins lie mainly in China.
New trade routes and alliances
While Chinese investment in the US has fallen dramatically, Beijing is intensifying its cooperation with countries in the Belt and Road Initiative (BRI), as ABC continues to report. Projects like the recently opened port in Peru would demonstrate China’s growing influence in Latin America. This could bring China not only economic but also geopolitical benefits as more than 140 countries are part of the BRI.
Xi Jinping’s focus on BRI countries could signal a strategic shift away from the US and diversification of trade ties. In 2023 alone, trade volumes between China and BRI countries increased by 2.8 percent, while investment in this region increased by an impressive 22.6 percent, according to ABC. At the same time, Chinese investment in the U.S. fell to $1.8 billion last year from a peak of $53 billion in 2016, research by Derek Scissors of the American Enterprise Institute shows.
A delicate balance
Despite all strategic steps, China is likely to remain in a difficult situation: the economy is struggling with the consequences of the pandemic and growth has collapsed. Beijing’s recent stimulus measures worth more than $1.4 trillion highlight internal pressures.
Independent analysts such as Fraser Howie warn that China’s dependence on the US market will be difficult to overcome: “There’s no escaping the fact that the US is the largest economy in the world and certainly has a very hungry consumer base – people are buying “It’s just a lot of stuff and China makes a lot of stuff, so if the US wants to be more strict about its purchasing sources, there’s little China can do about it,” ABC quoted him as saying.
Meanwhile, Trump continues to pursue his “America First” policy. However, his measures could harm global trade in the long term. Because: If Xi Jinping successfully strengthens strategic alliances, the USA could lose influence in geopolitical and economic issues, which in turn could have an impact on the global economy.
Editorial team finanzen.net