104% Super Tariff: Why Are Trump And China In Trade Tension?

Trump-China Trade War: The trade war tensions have just taken a new height with Trump's fresh tariff tantrums taking effect from midnight, which reportedly leads to an astounding 104% tariff on imported goods from China. But the Chinese government has emphasized they will not back down, and experts are also predicting the same. In short, Trump and China are set for an intense tariff war.

Trump's 104% Tariff On China:

During his Liberation Day on April 2, Trump announced a host of reciprocal tariffs on countries globally, with China facing a tariff of 34%.

However, the tensions escalated between the two countries when China retaliated with its own 34% tariffs on US products. Trump retorted back and threatened to impose a 50% additional tariff if China does not take its retaliatory tariff back. However, the White House press secretary confirmed that the US has gone ahead and imposed an 84% tariff on Chinese goods, which came into effect from 12:01 am on April 9th. Fresh tariffs are imposed on 60 other countries.

The 34% plus 50% tariff that totalled to 84% tariff will be an add-on to already imposed 20% tariff on Chinese products.

How Does It Impact China?

Dr. V K Vijayakumar, Chief Investment Strategist, at Geojit Financial Services said, "The heightened uncertainty and volatility that has gripped markets worldwide will linger for some more time. There are some significant takeaways from the ongoing chaos. One, the trade war is likely to be confined to the US and China. Others including EU and Japan have opted for negotiations. India has already started negotiations on a BTA with US. Two, the risk of a recession in the US has increased. Three, China is likely to be the worst-hit economy. Trump's threat of another 50% tariff on China will, if carried out, almost freeze Chinese exports to US. Fourth, China will try to dump its products like metals in other countries, and this will keep international metal prices depressed."

Why Trump and China are in a Trade War?

This will not be the first trade conflict between China and the USA, it has been ongoing since 2018. When Trump took over White House the first time between 2017 to 2021, he had imposed a host of tariffs including on China, that escalated a global trade war.

U.S. President Donald Trump began setting tariffs and other trade barriers on China to force it to make changes to what the U.S. says are longstanding unfair trade practices and intellectual property theft. The first Trump administration stated that these practices may contribute to the U.S.-China trade deficit, and that the Chinese government requires the transfer of American technology to China. In response to US trade measures, CCP General Secretary Xi Jinping's administration accused the Trump administration of engaging in nationalist protectionism and took retaliatory action, as per Wikipedia.

After the trade war escalated in 2019, the two countries agreed in January 2020.

Unlike other countries, the USA's domestic production is less than its domestic consumption, which results in its imports exceeding exports, and hence widening the current account deficit.

This is not the case with China, its domestic consumption is less than its domestic production, and that leads to exports exceeding imports, which keeps its current account in surplus.

By the end of 2024, it was reported that economies like China, Europe and the Middle East have a current account surplus, while the global current account deficit is widely occupied by the US.

In its statement, White House said on Liberation Day:

"Large and persistent annual U.S. goods trade deficits have led to the hollowing out of our manufacturing base; inhibited our ability to scale advanced domestic manufacturing capacity; undermined critical supply chains; and rendered our defence-industrial base dependent on foreign adversaries. Large and persistent annual U.S. goods trade deficits are caused in substantial part by a lack of reciprocity in our bilateral trade relationships. This situation is evidenced by disparate tariff rates and non-tariff barriers that make it harder for U.S. manufacturers to sell their products in foreign markets. It is also evidenced by the economic policies of key U.S. trading partners insofar as they suppress domestic wages and consumption, and thereby demand for U.S. exports, while artificially increasing the competitiveness of their goods in global markets. These conditions have given rise to the national emergency that this order is intended to abate and resolve."