In the ongoing trade conflict between the US and China, former President Donald Trump’s administration has applied a substantial 145 per cent tariff on Chinese imports, reasoning that China has more to lose in the trade relationship where they sell significantly more to the US than vice versa. Former Treasury Secretary Scott Bessent likened China to a card player with a weak hand, suggesting they would ultimately capitulate under pressure. However, contrary to expectations, China has displayed resilience, retaliating with punitive tariffs of their own.
The trade relationship, worth over US$660 billion last year, has seen high-stakes negotiations take place, with Bessent and top trade negotiator Jamieson Greer travelling to Geneva for discussions with Chinese officials. Trump’s recent reflection on possibly lowering tariffs further complicates the situation, with sceptics indicating there may not be a viable path towards resolution and that these meetings may merely serve to buy time.
Economists warn that both nations are interdependent; a failure to scale back tariffs would not only impact consumers but also disrupt businesses reliant on trade. In fact, many US manufacturers depend heavily on Chinese imports for essential materials and components, and the tariffs threaten to inflate production costs and reduce competitiveness.
China’s economy is also feeling the strain of the ongoing trade war, with the International Monetary Fund downgrading its growth forecast, though it remains prepared to endure the fallout. Past trade agreements, such as the Phase One agreement, provided temporary relief but failed to address deeper issues, including China’s internal subsidies for tech companies.
China has progressively reduced its reliance on the US market, shifting a greater percentage of exports to other regions, which may provide it with a buffer against the trade war’s impacts. Conversely, American consumers have shown a preference for lower-cost imports, further complicating Trump’s tariff strategy.
In conclusion, the trade conflict underscores the complexities of international economics, revealing that both the US and China have much at stake. Their interdependence contrasts sharply with the aggressive tariff policies, leaving both economies vulnerable. The resolution of these tensions remains uncertain, with both nations needing to reconsider their strategies to avoid further economic turmoil.