How China fights US tariffs

• U.S. President Donald Trump’s “America First” trade policy, aimed at reducing trade deficits, has been causing global economic turmoil.

• The policy, which includes “reciprocal tariffs” to eliminate unfair trade practices, has been postponed by 90 days for all 57 target countries, except China.

• The Trump administration’s goal is to compel trade partners to negotiate bilateral agreements within a stipulated period, reducing their trade deficits.

• China has retaliated by imposing retaliatory tariffs, raising the overall tariff burden to 104%.

• The White House has increased tariffs again to 145%, despite Washington admitting to the potential impact of these tariffs.

• The Trump administration has been ambiguous about the inclusion of tariffs on electronic goods, leading to confusion.

• China’s diversification of exports as part of its defensive strategy allows it to force the imposer to be imposed sooner.

• The “America First” trade policy is causing chaos and its adverse implications are difficult to gauge.

• Two issues arise: whether the 90-day pause in the implementation of “reciprocal tariffs” can provide opportunities for Trump to articulate his achievements, and Xi Jinping’s defiance against Trump’s attempts to corner Beijing.

The U.S.’s Negotiating Agenda and China’s Strategy

The U.S.’s Negotiating Agenda

• Donald Trump’s decision to pause the implementation of “reciprocal tariffs” to push trade partners to conclude bilateral deals was part of a strategy developed by his advisers.

• The move was part of a calculated negotiating tactic and a demonstration of Trump’s signature dealmaking style.

• The U.S.’s negotiating approach has undergone a major change under the Trump administration, with the U.S. Trade Representative (USTR) no longer in charge of negotiations.

• The U.S. has a gargantuan negotiating agenda, including significant foreign barriers to U.S. exports, foreign direct investment, and electronic commerce in India and 56 other countries.

• If Trump aims to secure a grand bargain, India would have to open its agricultural markets for U.S. agri-business, lower its agricultural subsidies, discontinue its public distribution system, and amend its Patents Act.

China’s Strategy

• China’s retaliation following the launch of Trump’s trade war has been unexpected.

• Over the past five years, the nature of the U.S.-China trade relationship has drastically changed, leading to a push back from the world’s second-largest economy.

• China has diversified its export markets, with ASEAN emerging as the most significant destination.

• China’s control over the rare earth market and its position as the second largest holder of U.S. Treasury bonds have enabled it to leverage its strengths to force the hands of its aggressor.

• Major economies must coordinate efforts to ensure the U.S. President abandons unilateralism and reposes his faith in multilateralism.