On 20 January 2024, President-elect Donald Trump is set to take office, and he’s already made waves with a proposed 10 per cent tariff on all imports from China. While Trump claims this measure is necessary due to China’s failure to stem the flow of fentanyl into the United States, the broader implications of such a move are significant.
The Backstory
During his campaign, Trump declared that he would impose tariffs as a means of negotiating trade deals, echoing similar strategies from his first term in office from 2017 to 2021. Observers, including local analysts, warn that this could lead to a renewed economic confrontation.
Expert Insights
- Stephen Olson, a visiting fellow at the ISEAS-Yusof Ishak Institute, noted that these tariffs could be seen as an opening gambit in a longer game of negotiation.
- Nick Marro, principal economist for Asia at the Economist Intelligence Unit, cautioned that the economic costs of such tariffs could provoke reconsideration from the Trump administration.
- Associate Professor Chong Ja Ian of the National University of Singapore pointed out that differences within Trump’s Cabinet could create volatility in US-China relations.
China’s Response
In reaction to Trump’s threats, the Chinese Embassy in Washington asserted that no one benefits from a trade war, emphasising that China already launched efforts to control drug trafficking following a 2023 agreement between Presidents Biden and Xi Jinping.
China’s spokesperson, Liu Pengyu, stated, “About the issue of US tariffs on China, China believes that China-US economic and trade cooperation is mutually beneficial in nature.” This sentiment reflects a desire for dialogue over conflict.
The Trade War’s Legacy
The first trade war resulted in approximately US$550 billion worth of tariffs affecting both US and Chinese goods. The potential for a repeat of such economic strife hangs in the air as Trump prepares for his presidency.
The dire impacts of a trade war extend beyond economics, potentially affecting consumer prices and international relations. Senior officials have highlighted that the battle against inflation is ongoing, suggesting any tariff increase might exacerbate economic conditions in the US.
A Critical Look Ahead
While speculation abounds regarding Trump’s specific strategies and Cabinet selections, the trade relationship between the US and China, which has a history steeped in both cooperation and conflict, is likely to face significant challenges.