Looking at the momentum of Donald Trump’s campaign for the US presidency, people everywhere are starting to take the scenario of his returning to the White House seriously. And people involved in international trade are wondering, will he ramp up the pressure on China again, and will he resort to adding new tariffs?

Let’s assume he gets elected again. What can we already guess?

A few inflammatory announcements already came out

I read this recently in the Washington Post:

Revoking China’s status as a “most favored nation” for trade — which is applied to almost all countries with which the United States trades — could lead to federal tariffs on Chinese imports of more than 40 percent, according to one analysis. Trump has floated imposing a 10 percent tariff on nearly all imports, which totaled $3 trillion in 2022.

Privately, Trump has discussed with advisers the possibility of imposing a flat 60 percent tariff on all Chinese imports, according to three people familiar with the matter who spoke on the condition of anonymity to relay private conversations.

Obviously, to importers who rely on Chinese manufacturers, that’s rather scary. Let’s take a step back…

It seems the USA are ready for more/higher tariffs

Bloomberg suggests the US Congress would support higher tariffs:

Beyond tariffs, Trump would push for a decoupling of the world’s two biggest economies with measures that include ending most-favored-nation status for China, which would raise tariffs and potentially other trade barriers to Chinese imports. Additional restrictions on investment and the flow of capital to China would also be likely. There are signs of congressional support for Trump’s hawkish trade agenda: A bipartisan group of lawmakers in December recommended raising tariffs on goods from China and further restricting investment in the country.

That’s also what comes out of the book ‘No Trade Is Free‘ by Bob Lighthizer, who served in President Trump’s cabinet as the United States Trade Representative. Here are some insights from his book:

• The book describes the journey from a bipartisan consensus that more free trade was better for the USA to the current bipartisan consensus that trade imbalances in general need correcting and that China is an adversary.
• The author is extremely positive about tariffs in general and calls for more tariffs. But that should not be a surprise since the author was instrumental in putting them in place…

(As an aside, the author mentions that about 30% of Vietnam’s economy is based on exports to the USA, that Vietnam is a non-market economy with a communist regime, and that the Vietnamese dong is manipulated. So, I would not exclude that a new administration could decide to rebalance the trade situation with Vietnam, too…)

A ‘revenge term’ on many levels?

Regarding domestic policy, Trump’s term from 2016 to 2020 was marked by a serious lack of preparation, and many of his executive orders have been challenged and were never enforced. One can guess that Trump and his entourage have been preparing for more effective policy-making this time, and domestic topics might be the center of his attention.

It also seems like he wants to put an end to NATO (or more realistically, to amend it as deeply as possible) and help put an end to the war in Ukraine in some way.

However, one of his positive accomplishments — at least in most US politicians’ eyes — has been the trade deal signed with China. So, will he work on changing trade dynamics? Probably. Will he also try to push for policy changes on investment, technology, and more generally on national security topics? Probably, too. Nobody knows where he will put most of his administration’s efforts if he does end up elected.

Does it really matter who governs the USA?

The fact, is tariffs are in the White House’s toolbox. They can be used as a threat to get concessions from trade partners, just like they were in 2018 when the first Trump administration announced the plan to raise tariffs on a wide range of products.

Trump is probably preparing for new tough negotiations with China and is setting the first anchor in people’s minds: ‘high tariffs on all goods made in China’. That’s just a negotiating tactic.

As this article in The Atlantic suggests, some wonder if the Biden administration hasn’t hurt China’s economy more than the Trump administration. The restrictions to export advanced semiconductors as well as the manufacturing equipment needed to make them, for example, have been pretty harsh on the CCP’s plans to become self-sufficient in that industry.

On top of that, the USA’s traditional allies, such as the European Union, and others, would probably be challenged by Trump on the topics of trade and defence, and they might strategically distance themselves from such an unpredictable partner to the benefit of China.

I asked a few of our Chinese employees, and the general sentiment is “whoever is in the White House doesn’t matter much now, it’s their country’s policy since they all agree on it”. And I guess they are right.

A final thought

My final thought on this topic is that the book “Enterprise China” did a nice job covering the situation and their general advice was right on point. You can see my interview with that book’s authors in How Running China like a Business is the Recipe for Economic Domination.