The US trade conflict has reached a critical juncture, primarily centered around its contentious relationship with China, as tariffs loom large over auto imports and consumer goods.
With 25% tariffs imposed on most auto imports, the repercussions are evident: car prices in the US are expected to rise unless these tariffs are suspended.
In a surprising shift, the suspension of reciprocal tariff increases by other countries has effectively reframed the dispute to focus predominantly on US-China tensions.
Historically, the scenario signifies a return to a familiar narrative from the first Trump administration, marked by high tariffs and escalating rhetoric.
Currently, the US ports receive around a million containers from China each month, filled to the brim with diverse consumer goods, including furniture, toys, and electronics.
Unless more tariff exemptions are granted, the trade flow for these products is likely to come to a grinding halt.
Trump administration officials are exploring potential tariffs on technology imports, although smart devices like smartphones and computers are currently taxed at 20%.
Meanwhile, the remaining bulk of Chinese goods exports, amounting to about $300 billion, are facing tariffs exceeding 100%, marking a drastic attempt to curtail trade.
Consequently, the price of everyday goods, from household items to electronics, is expected to rise significantly as affordable Chinese merchandise fades from prominent retailers such as Walmart and Costco.
In terms of economic consequences, the overall impact is anticipated to be somewhat limited.
The extensive tariffs imposed will apply to less than 2% of China’s GDP, which, although substantial for China, is projected to minimally affect overall US economic dynamics.
Even if half of these exports successfully find alternative markets, the direct impact on China’s economy is expected to be less than 1% of its GDP.
Simultaneously, global goods trade is anticipated to decline by about half of one percent, an amount which reflects only a quarter of the growth in world goods trade witnessed the previous year.
Though the trade relationship between the US and China will suffer setbacks and inconveniences, the broader international landscape is unlikely to feel significant repercussions.
As the mid-term congressional elections approach, it is the Trump administration that may face escalating pressure, unless a pause on penalty tariffs on China is soon negotiated.
Optimistically, the Trump administration hopes to announce a major achievement in the form of a new US-China trade agreement before the elections in November next year.
Much of the script for the US-China trade dispute seems preordained, resembling earlier patterns seen during the Trump presidency, particularly from January 2018 onwards.
During that timeframe, tariffs were cut as a bargaining chip, and similar actions are projected to unfold in the coming months as both sides navigate the negotiation landscape.
In the ensuing months, we can expect a series of sharp exchanges between the two economic powerhouses as they gauge each other’s intentions and potential concessions.
The US Trade Representative’s 2025 National Trade Estimate Report on Foreign Trade Barriers outlines core US grievances that will likely serve as a guide in upcoming negotiations.
The US will press for commitments from China to enhance purchases of American products, including energy and agricultural staples, alongside improved access routes for US financial institutions into China’s domestic market.
These negotiations will mostly focus on small, incremental changes reminiscent of previous agreements, given that many underlying issues persist.
Contrarily, China will primarily advocate for the reduction of penalty tariffs, mirroring the previous negotiations where tariffs remained entrenched.
Despite the anticipated focus on tariffs, there appears to be a limited engagement on broader issues, particularly since discussions will largely center on mutual penalties.
Looking ahead, optimism surrounds the anticipated outcome of these negotiations with predictions of a renewed trade agreement leading to declarations of success in the Trump administration.
Nonetheless, a distinct reality looms: the ongoing trade conflict over inexpensive consumer goods no longer reflects the core of economic competition between the two nations.
The US has implemented an effective ban on imports of electric vehicles from Chinese manufacturers and has restricted the export of advanced technology to China from any source.
These key issues, including significant industrial subsidies under the current administration, are unlikely to see significant negotiation focus.
The evolving competition between the US and China is increasingly centered around innovation and technological advancement, focusing less on consumer goods and more on the future landscape of industrial production.
The forthcoming negotiations may ultimately leave these crucial matters unaddressed, emphasizing a shift towards a more entrenched rivalry in cutting-edge technology.
image source from：https://www.lowyinstitute.org/the-interpreter/what-s-next-us-trade-conflict
