US President Donald Trump announced that he will impose an additional 100 percent tariff on Chinese goods beginning on Nov 1 or earlier in addition to the current 30 percent tariffs. After months of a trade truce between the two countries, the threat has significantly increased.
“The United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying. Also on November 1st, we will impose Export Controls on any and all critical software,” Trump wrote in a post on Truth Social on Friday.
Beijing’s increased export restrictions on its critical rare earths, which are used to make many electronics, are linked to Trump’s announcement. Consequently, he seemed to cancel a meeting with Chinese President Xi Jinping that was scheduled to take place in South Korea later this month.
One industry that China controls is the mining and processing of rare earths. In addition to cars, they are necessary for a wide range of products, including robotics and military equipment.
Investors reacted negatively to Trump’s first announcement on Friday, which he made via a Truth Social post, threatening “massive” additional tariffs. This was due to concerns about a repeat of the previous spring, when taxes on Chinese exports skyrocketed to an astounding 145 precent.
Following Trump’s initial remarks, markets saw a severe decline on Friday, with the Dow dropping 878 points, or 1.9 percent. The tech-heavy Nasdaq fell 3.5 percent, while the S&P 500 fell 2.7 percent.
Even while Trump doesn’t always follow through on his threats, businesses, consumers, and investors should nonetheless be concerned.
The two biggest economies are interdependent. America depends on China for hundreds of billions of dollars’ worth of goods, even though Mexico has recently overtaken China as the country’s biggest supplier of goods. In the meantime, one of America’s main export markets is China.
Among the most important products that the US imports from China are electronics, clothing, and furniture. Trump has urged CEOs, particularly in the tech industry, to shift production to the US, but in recent months, he has softened his stance as corporate executives have appeased the president by announcing hundreds of billions of dollars in investments in US manufacturing, even if they still produce the majority of their goods abroad.
Trump issued an exemption for electronics, subjecting them to 20 percent tariffs, shortly after slapping minimum 145 percent tariffs on Chinese goods, which effectively constituted a trade embargo. In many respects, the action was a recognition that the Trump administration recognized the harm his exorbitant tariffs were causing to the US economy.
Then, in May, US and Chinese officials agreed to reduce tariffs, further solidifying the interdependence of trade. China reduced duties on US exports from 125 percent to 10 percent, while the US reduced tariffs from 145 percent to 30 percent.
As a result, the stock markets in both nations surged.
It was just a question of time.
Trump asserted on Friday that China’s trade hostility “came out of nowhere.” In actuality, though, it has been simmering for months.
Ensuring that China boosts its supply of rare earth magnets has been a crucial component of trade deals for the US. However, Trump has regularly accused China of violating the terms in recent months, despite several seeming advances.
In response, Trump initially imposed restrictions on the sale of American technology, notably a crucial Nvidia AI chip, to China. Later, several of these restrictions were removed.
The Trump administration then declared that it would soon charge taxes for cargo transported on ships that are owned or controlled by China. In response, China implemented a similar plan on American ships on Friday.
Xi has shown no mercy in his choice of retaliation, and Trump has already indicated that there is no upper limit to the tariffs he will impose on China.
However, Trump’s power to apply tariffs at will, may soon come to an end, pending the outcome of a historic lawsuit that will begin in the Supreme Court next month. However, Xi is not subject to such constraints.