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Analysis of Trump's Tariff Policy

New Research Intelligence Creations 2025-04-03 13:40:10

Event Summary

On April 2, 2025, U.S. President Trump officially signed the "Reciprocal Tariff" executive order, implementing differentiated tax rates for major global trading partners: China (34%), the European Union (20%), Japan (24%), South Korea (25%), India (26%), Vietnam (46%), Thailand (36%), etc., and imposed an additional 25% tariff on all imported automobiles and parts.

This policy, under the guise of "fair trade," actually targets China, the European Union, and Asian manufacturing countries through tax rate disparities, causing a strong backlash from the international community. Canada, Mexico, the European Union, and other countries have already initiated plans for retaliatory tariffs, plunging the global supply chain into short-term chaos. The long-term impact depends on the strength of multilateral countermeasures and the speed of industrial chain restructuring.

Policy Background

The implementation of Trump's tariff policy is rooted in the long-standing structural contradictions in the United States and profound changes in the domestic political ecology. Economically, the hollowing out of American manufacturing and the ongoing trade deficit issues have continued to ferment; politically, social polarization in the United States has intensified, and the dissatisfaction of voters in traditional manufacturing states with the economic situation has been amplified by populist sentiments.

The Trump administration continued the "America First" protectionist logic by using tariffs as a tool for multiple games. Its core objectives include: protecting traditional industries such as steel and aluminum by increasing import costs, thereby promoting the return of manufacturing; using tariff revenues to alleviate fiscal deficits and subsidize domestic tax cuts; simultaneously, creating trade frictions to gain support from voters in the Midwest, paving the way for the 2026 midterm elections and re-election.

The legal basis for the policy comes from the International Emergency Economic Powers Act and Section 232 of the Trade Expansion Act. However, the international community widely criticizes the abuse of the "national security" argument to bypass WTO rules and implement unilateral sanctions. It is worth noting that Trump's so-called concept of "reciprocity" fundamentally conflicts with the principle of overall balance of rights and obligations in the WTO, as it only measures trade deficits in goods while ignoring the deep impact of trade surpluses in services and the international status of the US dollar on trade structure.

Impact on China: Challenges and Opportunities Coexist

The Trump administration imposed a cumulative tariff of 20% on Chinese goods imported into the U.S. If Congress were to revoke China's "Permanent Normal Trade Relations" (PNTR) status, the total tariff could skyrocket to 68%, significantly impacting industries such as food and beverages, electronics, and textiles. It is estimated that this would lead to a decrease in exports to the U.S. by 6-9 percentage points.

However, China's automobile export dependence on the US is only about 0.5%, and new energy vehicles achieve a doubling of export volume in 2024 through the "Belt and Road" initiative (such as Russia, the Middle East), partially offsetting the impact of a 100% electric vehicle tariff. However, automobile parts exports face a severe test, with exports to the US reaching 10.1 billion US dollars in 2024, and 30% of US car companies' components rely on China, forcing the supply chain to accelerate "de-Chinaization" under tariffs.

Challenges also bring opportunities: The EU, Japan, and South Korea are turning to China for cooperation due to U.S. tariffs, accelerating regional economic integration under the RCEP framework; the process of domestic substitution in fields such as semiconductors and chips has significantly accelerated; China is showcasing greater economic resilience by expanding domestic demand and promoting upgrades in high-end manufacturing.

Global Impact: Supply Chain Restructuring and Inflation Spiral

The United States has imposed a 25% tariff on automobiles and auto parts, directly impacting Mexico (which relies on the United States for 3 million vehicle exports) and Japan and South Korea (where auto exports to the United States account for more than 25% of their vehicle production). To avoid rising costs, automakers may turn to China for purchasing auto parts, accelerating the "de-Americanization" of the global supply chain. However, American automakers also face difficulties: 30% of their auto parts depend on China, causing an increase in the cost per car of $3,500 to $12,000, weakening their global competitiveness.

Trade confrontation is becoming cyclical: The EU plans to impose tariffs on American technology products, while China counters by restricting imports of soybeans, corn, and liquefied natural gas from the U.S., and limiting exports of rare earths. The global trade tensions are escalating, and the WTO's dispute resolution mechanism is paralyzed due to U.S. obstruction of judge appointments, further eroding the authority of the multilateral system. Economies like Mexico and South Korea, which are heavily reliant on the U.S. market, face the risk of recession.

Conclusion: The Costs of Protectionism and Future Pathways

Trump's tariff policy is a mixture of economic nationalism and geopolitical****, with its short-term effect of stimulating the return of manufacturing potentially being outweighed by long-term costs: consumers bear inflationary pressures, corporate investment intentions decline, and the credibility of the US dollar is damaged. For China, the pressure on exports forces technological innovation and market diversification, but it is necessary to be wary of the loss of industrial chain position in the process of supply chain reconfiguration.

The international community's countermeasures and joint boycotts have shown results: China, together with over 160 countries, filed a complaint in the WTO, the European Union launched the "anti-coercion tool", and more than 130 countries worldwide signed the "Joint Statement" opposing unilateralism. Historical experience has shown that there are no winners in trade wars, only by returning to multilateral consultations and rebuilding an inclusive global economic governance system can we avoid the vicious cycle of "beggar-my-neighbor". In the future, the uncertainty of US policy shifts and the response capabilities of various countries will become key variables in reshaping the global trade order.

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Analysis of Trump's Tariff Policy

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