In early April, United States President Donald Trump announced that he would be placing tariffs on dozens of countries in what he says is an effort to strengthen the American economy. The Republican has put a temporary pause on the measures so that he can negotiate. The negotiation with China could be the toughest for several reasons.
China Was Trump’s Top Target
When he laid out his plans this spring, Trump made sure to hit China harder than any other country. The Asian nation holds the world’s second-biggest economy, and Trump has frequently complained of America being treated unfairly.
Trump is Not in a Position to Back Down
One of the American president’s biggest talking points on the campaign trail was how he would use tariffs to create a fair economy for the American consumer. It is important to him to push this issue through.
The Idea of Tariffs is Unpopular in the United States
While Trump’s tariff plan was supported by his voters during the election season, the way he went about enacting it has been unpopular with voters. Recent polling shows that tariffs aren’t supported by Republicans, Democrats, or Independents.
The Measures Are Also Unpopular With Economists
In the run-up to Trump’s tariff announcement, many of the country’s best financial minds explained why they thought they were a bad idea. Trump has raged against these economists, but they haven’t budged off this take.
The Reaction from Wall St. Seemed to Fluster Trump
Soon after the measures were announced, the stock market went into a nosedive. The market then moved up and down depending on Trump’s messaging about next steps. The market does not like uncertainty, and the stock market is rife with uncertainty at the moment.
Deals Have Been Slow to Come By
When Donald Trump first placed a 90-day pause on the tariffs, he claimed that his White House would complete 90 deals in 90 days. So far the only real pact that has occurred was between the United States and the United Kingdom.
The United States is Seemingly Desperate to Make Deals
When the White House initially claimed that it would complete 90 deals in 90 days, it also boasted that countries had been lining up to finalize deals. This week, the administration sent a letter to countries, indicating that it was time for them to make their best offer, seemingly attempting to reignite talks.
Countries May Be Content to Wait Trump Out
While the measures first unmoored American trade partners, they now seem willing to take a wait-and-see approach to negotiations. Recognizing that tariffs are so unpopular in America, it may be worthwhile to explore the possibility of eliminating them.
Talks With China Are the Most Complex
While there are simple deals to be made with other countries, that is not the case with China. The U.S. and China are heavily reliant on each other, and while a more equitable deal is possible, it may not happen quickly.
The Trade War is Nothing New to China
While the tariffs announced by the American president this spring were especially harsh, the United States, then under the leadership of Trump, began placing tariffs on China in 2018; however, the COVID-19 pandemic mitigated the impact of those measures.
China Has Been Preparing for the Looming Battle
After the 2018 trade barriers against China were levied, the Asian nation began to react domestically. China worked to reduce its reliance on foreign products and also increased research and development to identify what could be manufactured domestically.
The Biden Administration Kept the Tariffs
When Joe Biden took office as president in 2021, he retained the tariffs against China. The Democrat also added new measures against the Asian nation. Biden’s administration implemented additional tariffs targeting the manufacture of solar panels and electric vehicles.
China Also Sought Out New Trade Partners
As the world’s two largest global economies, the U.S. and China are essential trading partners, but they are not the only ones. When the United States tariffs were first announced in 2018, China looked to make deals with nations that could offer similar raw materials.
Trump Instituted New Tariffs on Steel This Week
The Trump administration recently announced that it would be doubling the tariff on steel from 25% to 50%. The president says that by doing so, he will be protecting the steel manufacturers within the United States. After their recent deal with the U.S., the United Kingdom was exempted from the tariffs.
The Move May Hurt Strategic Partners More Than China
The decision to raise tariffs on steel isn’t expected to significantly impact China, as the country imports relatively little of the material into the U.S. The move drew criticism from two key U.S. trade partners, Canada and Mexico, who are seeking an exemption.
China’s Political System is Different Than the U.S.’s
U.S. congresspeople face elections every two years, while the president faces elections every four years. And disruptions in the economy mean that they can be voted out of office. China’s political system does not have election seasons, allowing its government to wait out hardships.
China Gains Some Benefits if the Tariffs Take Effect in the U.S.
If an agreement isn’t reached and the tariffs take effect, China’s economy will be harmed, but there will be political benefits from allowing the American people to deal with the consequences, and discontent in America will improve China’s bargaining position.
President Xi Drives a Hard Bargain
One of the biggest issues the Trump administration is facing is the power of Chinese President Xi Jinping. The Chinese leader has been in office since 2013. Just this week, Trump lamented that it is very hard to make a deal with Xi.
Will Trump’s Stubbornness Rule the Day
There is still time for the American president to make favorable deals, but at the moment, they do not seem likely. With China being his top target, it is likely that the Republican will be reticent to lose any deal and could be looking at an extended period to make one.
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