How will Trump Tariffs Impact China Amid US Protectionism
US President Donald Trump addresses the joint session of the Congress (Image credit The White House)
Trump Reciprocal Tariffs Set Off Sino-US Trade War
By TRH News Desk
New Delhi, April 3: Since taking office for his second term on January 20, 2025, US President Donald Trump has escalated protectionist trade policies, imposing significant tariffs on Chinese imports. China’s $1 trillion trade surplus in 2024 now seems in jeopardy.
These measures build on tariffs from his first term (2017–2021) and reflect his campaign promises to address trade imbalances, protect US manufacturing, and pressure China on issues like fentanyl trafficking.
The economic and strategic impacts of tariffs on China appear to be extensive in scope. Trump’s second-term tariff policy against China began with a 10% tariff on all Chinese imports, effective February 4, 2025, under the authority of the International Emergency Economic Powers Act (IEEPA).
This was doubled to 20% on March 4, 2025, and further escalated to a total effective rate of 54% by April 9, 2025, following additional increases announced on April 2, dubbed “Liberation Day”.
These tariffs apply to over $450 billion in annual US imports from China, covering consumer goods such as electronics, clothing, industrial components, and raw materials. Additionally, Trump closed the de minimis exemption loophole (effective May 2, 2025), which previously allowed duty-free imports under $800, heavily affecting Chinese e-commerce giants like Shein and Temu.
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China’s exports to the US, which accounted for a significant portion of its $3.5 trillion export economy in 2024, have faced immediate pressure. The 54% tariff rate threatens to reduce US-bound exports, historically a key driver of China’s trade surplus, which hit a record $1 trillion in 2024.
However, China has mitigated some impact by diversifying its export markets since Trump’s first-term tariffs (2018–2019). The share of Chinese exports to the US has declined, while trade with the European Union, Southeast Asia, and Mexico has risen.
For instance, China’s global trade share increased by approximately 4% since 2016, cushioning the blow.
Estimates suggest the tariffs could slow Chinese export growth by 1.3 percentage points and GDP growth by 0.2 points annually, a modest impact compared to earlier projections, due to this diversification.
Low-end manufacturers, facing razor-thin margins, have been hit hardest. Rising tariffs such as 52.5% on some goods, including existing aluminium tariffs have forced companies to relocate production to countries like Vietnam or absorb losses, as seen with US-based Citibin shifting manufacturing out of China.
High-value sectors, such as electronics and advanced technology, remain resilient due to China’s entrenched supply chains and state support. The tariffs on smartphones, laptops, and other consumer electronics have increased costs, but China’s dominance in rare earths and critical minerals provides leverage.
China’s economy was already strained before the tariffs, with declining tax revenues, deflation, and slowing growth (at its lowest in decades). The tariffs exacerbate these challenges by reducing export-driven revenue, leaving less fiscal room to support consumers or exporters.
Foreign investment has continued to flee, with factory prices in deflation and economic growth faltering. Some analysts warn that sustained tariffs could push China’s economy toward a tipping point, though nationwide instability such as riots remains speculative.
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