Chinese experts heard by Brasil de Traje say US President-elect Donald Trump’s plan to increase import taxation could disrupt the supply chain in the United States.
On November 25, a few weeks after winning the presidential election for the second time, Trump said that, on the first day of his term (January 20, 2025), he would impose new tariffs of 25% on all products imported from Canada and Mexico, and an extra 10% tariff on top of the already existing duties on products from China.
Since 2002, the three abovementioned countries have been the United States’ main trading partners, when China replaced Japan in this triad in its first year as a member of the World Trade Organization (WTO).
Last year, Mexico replaced China as the largest trading partner with the United States, a position the Asian country had held for 17 years. This was partly a result of the taxation policies implemented by the first Trump administration on Chinese products, maintained by Joe Biden’s administration.
During his campaign, Trump even said that his government could impose tariffs of 60% on Chinese products and propose taxes of 20% on imports from all countries.
Imposing tariffs on all countries will increase prices in general, and lead to inflation problems, explains Ding Yifang, a senior researcher at the Taihe Institute.
With inflation, the Federalista Reserve will be forced to raise interest rates, he adds. For the Chinese researcher, this is “completely contradictory to what Donald Trump intends to do.”
A day before the runoff election that gave him victory over Democrat candidate Kamala Harris, Trump promised at a rally in North Carolina a plan to “drastically cut taxes for workers and small businesses”. “We will have no tax on tips, no tax on overtime and no tax on Social Security benefits,” said the Republican.
“He wants to lower interest rates in order to revitalise the manufacturing sector. Well, if inflation increases, he cannot keep his promise about a low inflation rate. So, it’s totally contradictory,” says Ding.
“If you launch a trade war, you have to bear the cost”
Both Ding Yifang and the dean of the China Institute of Fudan University, Li Bo (the two are economists), agree that the US will lose a lot with Trump’s taxation policies on imports.
Those export restrictions also target the US high technology sector,” says Li Bo, general director of the Chinese news website Guancha.
“In this war, that’s not only China losing. There are American companies, American consumers, all the third-party suppliers. If you launch a trade war, you have to bear the cost,” he added.
The Chinese embassy in the US stated that “China-US economic and trade cooperation is mutually beneficial in nature” and that “no one will win a trade war or a tariff war.”
Chinese containers at the Port of Los Angeles in Long Beach, California, May 14, 2019/ Mark RALSTON / AFP
Ding Yifang explains that almost half of all Chinese imports to the US aren’t final consuming goods, but intermediary goods.
“So, American downstream enterprises need these intermediary goods to make their final products. If the tariffs add more costs to their production, that will damage American firms’ competitiveness, both on the domestic market and on the international market,” adds Ding.
How China will act in case Trump fulfills his promises
At the beginning of December, China’s Ministry of Commerce announced measures to tighten controls on the export of items that can have dual uses – i.e. both civilian and military – to the United States. The new measures are part of efforts to defend China’s security and interests and comply with the non-proliferation of weapons of mass destruction, according to a statement from the Chinese ministry.
In other words, it means a ban on the export of gallium, germanium, antimony and the so-called superhard materials to the United States. These minerals are used in the semiconductor and other high-tech industries. Since 2014, more than 90 percent of raw gallium has been produced in China, which is also the world’s largest producer of raw germanium.
As another export restriction had already taken place in 2021, the study calculated that a simultaneous complete ban on gallium and germanium exports from China could reduce US GDP by US$ 3.4 billion.
Last year, China was responsible for 48% of the antimony mined in the world. It is used in ammunition, infrared missiles and nuclear weapons, among other military uses. Chinese experts believe that the measures were retaliatory and that there may be more in the future.
The retaliation targets US tariffs and “also the prohibition of the Biden administration on exports to China of semiconductors.
“To my understanding, why China’s government just announced these measures of the export control [is that] it does show our firm stance, so we are not afraid about any kind of trade war or technology war,” concludes Li Bo.
Edited by: Rodrigo Durão Coelho
