Are Trump’s Asia Tariffs a ‘Direct Attack’ on China?

During his address on Wednesday, US President Donald Trump detailed tariffs impacting nearly all of America’s trading partners, directing pointed remarks toward Beijing.

“I hold President Xi [Jinping] of China in high regard, and I respect China greatly, but they have long exploited our markets,” Trump stated in his speech.

Trump displayed a chart indicating nations and regions allegedly imposing trade barriers against US products, asserting, “In that first row, China stands at 67%. This reflects tariffs imposed on American goods along with currency manipulation and trade restrictions.”

He further remarked, “We will impose [on China] a reduced reciprocal tariff of 34%. In other words, they have us at a disadvantage, but we will charge them less in retaliation. So why would anyone be upset about that?”

The Chinese Commerce Ministry promptly rebuked the initiative, calling it “a classic example of unilateral bullying” and vowed to take “determined actions to protect its rights and interests.”

Additionally, the state-run news outlet Xinhua accused Trump of reducing trade relations to a simplistic tit-for-tat exchange.

Analysts suggest that China has valid grounds for its discontent.

To begin with, this recent declaration builds on existing tariffs, which are currently at 20% for Chinese products.

Moreover, the imposition of hefty tariffs on Southeast Asian nations such as Cambodia, Vietnam, and Laos has effectively “closed off” avenues for China to adapt its supply chains that were designed to navigate the tariffs established during Trump’s initial term.

Five Asian countries are among the ten nations facing the highest tariffs.

Since his re-election in January, Trump has instituted new tariffs on imports from China, raising the rates to 20%.

In the coming week, these tariffs are set to escalate to 54%, exempting products such as vehicles, steel, and aluminum which will face lower tariffs.

China has also faced additional trade confrontations from Trump.

Earlier on Wednesday, the President signed an executive order to eliminate a provision for low-value shipments from China.

This provision had allowed Chinese e-commerce giants such as Shein and Temu to deliver packages valued under $800 (£617) to the United States, free from taxes and inspections.

Customs data indicates that nearly 1.4 billion shipments entered the United States under this provision in the previous fiscal year.

The withdrawal of this exemption could compel some Chinese companies to pass increased costs onto consumers, rendering their products less competitive in the American market.

This accumulation of tariffs presents a troubling scenario for Beijing, according to Deborah Elms from the Hinrich Foundation consultancy.

“While the new tariffs may not be explicitly targeted at China, their imposition alongside existing tariffs mean that the overall financial burden is rapidly escalating,” she stated.

“China will need to retaliate; they cannot afford to remain passive amidst this situation,” she added.

Trump has also enacted significant tariffs, ranging from 46% to 49%, on Vietnam, Laos, and Cambodia.

This marks a comprehensive attack on Beijing’s expansive supply chain, according to Stephen Innes from SPI Asset Management.

“Vietnam and neighboring countries are merely collateral damage in what appears to be the most assertive realignment of US trade policies in a generation,” he remarked. “This is not a tit-for-tat exchange; rather it’s strategic containment executed through tariff warfare.”

Laos and Cambodia, being among the least affluent nations in the region, rely heavily on Chinese investments in supply chain development. These elevated tariff rates are expected to severely affect both countries.

China stands as Vietnam’s largest trading partner and greatly benefitted from the strained relations between the US and China during Trump’s first term.

After Trump instituted tariffs on China in 2018, certain businesses reevaluated their production locations, with many choosing to relocate their manufacturing to Vietnam.

This shift has resulted in increased exports from Vietnam to the US, bolstered by Chinese companies that moved their production there.

“Vietnam has seemingly been targeted [by Trump] due to its role in facilitating China’s evasion of prior tariffs,” remarked Stephen Olson, a former US trade negotiator, in an interview with the BBC.

Despite the US being Vietnam’s leading export market, China remains its primary supplier, furnishing over a third of its imports, based on the latest government statistics.

Moreover, Chinese investments accounted for nearly one-third of all new investments in Vietnam last year.

According to Pushan Dutt, a professor at INSEAD business school, the imposition of new taxes on Southeast Asia will prove “restrictive” for China.

“China grapples with demand issues, and previously under Trump, Chinese companies had adeptly adjusted their supply chains and moved production to [Southeast Asian Nations]. This option has now been closed off,” he noted.

However, American firms that manufacture in Southeast Asia will also feel the pinch from Trump’s tariffs.

For example, prominent American firms such as tech leaders Apple and Intel, along with sports apparel giant Nike, operate large factories in Vietnam.

A recent survey conducted by the American Chamber of Commerce in Vietnam revealed that a majority of US-based manufacturers are anticipating workforce reductions if tariffs are enforced.

China now faces a pressing question regarding how to respond to the new tariffs, with only days before their official implementation.

Olson anticipates a “strong” reaction from Beijing, involving tariffs and other measures that would complicate operations for US companies in the Chinese market.

Given the existing challenges confronting the Chinese economy, Beijing must navigate “difficult choices” in the immediate future, according to Professor Dutt.

“Increasing exports to other regions runs the risk of de-industrialization in those areas, which political leaders there will be unlikely to accept. Consequently, China must tap into domestic demand and invigorate the Chinese consumer base,” he advised.

The imposition of tariffs could also encourage China to forge alliances with other Asian nations similarly affected by US tariffs.

Wang Huiyao, a former Chinese Communist Party member associated with the Center for China and Globalization think tank, urged Asian countries to “collaborate in facing these challenges and to combat protectionism.”

“Ultimately, the US risks losing influence and may find itself isolated,” he added.

Discussions aimed at collaboration are already underway. Recently, China, South Korea, and Japan held their first economic talks in five years, agreeing to accelerate negotiations towards a free trade agreement that was initially proposed over a decade ago.

The new tariffs might provide them with an added incentive to advance those plans.

However, Beijing may need to endure short-term difficulties while deliberations with Washington proceed.

“In the end, the US and China are likely heading towards negotiations where they will seek a comprehensive agreement covering multiple issues,” Olson remarked.

“This resolution is not expected to manifest soon, and I fear conditions may worsen before they improve,” he concluded.