President-elect Trump made tough remarks about tariffs en route to securing a landslide Republican victory in November, but companies are now facing a trade war that could surpass the one Trump started in 2018 during his first term. Preparations are underway for.
Tariff negotiations may have served as an early negotiation tactic in addition to policy proposals, but they have already had political and economic consequences.
U.S. ports are seeing a surge in cargo volumes ahead of expected import taxes, with President Trump imposing general tariffs of 10% to 20% on products from China, one of the U.S.'s major trading partners. He said a 60% tariff could be applied.
The Port of Los Angeles, the U.S.'s main commercial gateway to China, handled about 1 million 20-foot containers in October, a 25% increase from a year earlier, and port officials say the new tariffs We believe that this is one of the reasons for the possibility of Volumes increased 16% in November and 19% in December.
Last month, Canadian Prime Minister Justin Trudeau headed to Mar-a-Lago in Palm Beach, Florida, to meet with President Trump, following President Trump's threat to impose 25% tariffs on Canadian imports. was followed by Canada's Minister of Finance. and the Minister of Foreign Affairs.
In Congress, lawmakers are pushing to bring China into the United States by abolishing Permanent Normal Trade Relations (PNTR), a classification given to China when it joined the World Trade Organization (WTO) more than 20 years ago. is debating whether to demote its status as its most favored trading partner. .
The move will be largely symbolic, given that the United States has maintained tariffs on China for years and recently imposed new tariffs on electric vehicles and electronic components. But it would nonetheless send a clear signal that economic relations between the United States and China are deteriorating.
“This is basically WTO,” Bill Reinsch, chairman of international business at the Center for Strategic and International Studies, told The Hill.
A spokesperson for the Trump-Vance transition team told The Hill that the incoming administration intends to “move quickly” on tariffs and economic stimulus and “re-support” American jobs.
Here's a look at how a reset in the economic relationship between the US and China will affect the broader dynamics within both countries and the global economy.
Revocation of PNTR status
Companion bill in the house and overriding senate China's PNTR status with the United States could pave the way for more comprehensive tariffs on China than the federal government has enacted in recent years.
House bill sponsor John Moolener (R-Mich.), chairman of the House China Communist Party Select Committee, told The Hill that the U.S. should pursue nothing more than a reset of economic relations.
Moolener said in a statement to The Hill that the bill gives the U.S. an opportunity to “reset our economic relationship with China and restore industrial capacity while directing tariff revenues to U.S. industries affected by China's retaliation.” He said he would give it.
“I can say this conceptually, but [Trump] We would like to take a tough stance towards China and work to ensure that this relationship moves in the right direction. We need a reset,” he said.
Trump's team has said it wants to move quickly on the issue, but the scope of the 60% tariffs on Chinese goods – including chemicals, pharmaceuticals, electronics, metals and minerals – remains to be implemented at various stages. likely to be necessary.
“A 60% tariff on all of this would be a huge shock to the system,” Mary Labrie, an economist and senior fellow at the Peterson Institute, said in November.
The tariffs will be implemented in four waves starting in the third quarter of 2025, affecting three-quarters of total imports, according to a forecast analysis by Swiss bank UBS. The first two rounds will impose a 60% tariff, while the last two will impose a 30% tariff, affecting $321 billion worth of imports.
Chinese President Xi Jinping told President Biden at a summit in Lima, Peru that his government is “ready to work with the new administration to maintain communication.”
Tariffs do not necessarily affect prices, and inflation did not directly result from President Trump's trade war in 2018, but affordability issues caused by new tariffs will continue even after the pandemic inflation. It remains a top concern for many economic watchers.
The Federal Reserve raised its forecast for inflation in 2025 from an annual rise of 2.1% to 2.5%.
Strengthening monitoring of US investment in China
The deterioration in trade relations could come with new restrictions and reporting requirements on U.S. investment in China, as regulators become increasingly indifferent toward China.
Recent legislation by former Sens. Bob Casey (R-Pennsylvania) and John Cornyn (R-Texas) would require investors to notify the Treasury Department before putting money into sensitive technology. The bill passed the Senate last year. It passed 91-6, but was not included in the National Defense Authorization Act for fiscal year 2025.
However, the Treasury Department has released updated information. Rules regarding foreign investment In October.
And Congress is considering other similar measures. including prohibition Percentage of investment in “critical capabilities” in “countries of concern” and codified of presidential order Biden announced that he would limit military technology investments.
Venture capital funding to China is declining, falling by 19.5% from 2023 to 2024, according to the analytics firm. global data. Total transaction volume during this period decreased by 21.2% from 2,480 to 1,954 transactions.
Export regulations beyond chips
Export controls on advanced technologies such as artificial intelligence chips are already in place against China, but as economic relations cool and geopolitical tensions rise, export controls may be extended to other technologies as well. be.
Reinsch told The Hill that he expects the Biden administration to announce new export control measures before the end of his term, a move that could foreshadow broader sanctions by the Trump administration.
“For the Trump team, there won't be much left to do on chips…but the question will be whether they want to look at geospatial technology, satellite-related technology, diving technology and deep-sea technology. Military “There are a wide variety of things that are important to us,” he said.
New pressures on traditional trading allies
The trade beef rapprochement between the United States and China is already ring-fenced by President Trump's proposed general tariffs that contradict multiple U.S. trade agreements, including the 2018 NAFTA update, known as the United States-Mexico-Canada Agreement (USMCA). It involves America's allies who are in trouble. ).
The country most squeezed between the economic interests of the United States and China is Mexico, which serves as an intermediate supplier for many Chinese goods imported into the United States.
Former Sen. Sherrod Brown (D-Ohio) said in September that “China is actively avoiding U.S. tariffs by moving manufacturing to Mexico.” “Stopping China's abuse of the USMCA and Mexico's soaring steel prices will protect American industry.”
Tensions over trade relations between China and Mexico have led Canadian leaders to seek a new exclusive agreement with the United States that could undermine the traditional North American trade framework in place since the early 1990s. I'm starting to explore.
“We need a bilateral trade agreement with the United States and a separate bilateral trade agreement with Mexico,” Ontario Premier Doug Ford told reporters in November, the Toronto Star reported. There is a clear consensus that everyone agrees that this is the case.”
“We know that Mexico is bringing in cheap Chinese parts and shipping them with 'Made in Mexico' stickers on them.” [them] I went all the way to the United States and Canada,” he said.
It is also possible that allies, particularly in Europe, will not follow America's lead and withdraw from China, and that China may strengthen ties as the United States withdraws.
“China would be wise to seek to improve economic relations, especially with Europe, because we have a lot in common,” Tao Wang, an economist and head of Asian economic research at UBS, said in a speech in November.
The scale of China's retaliation
No matter how far the Trump administration decides to impose tariffs on China, China's response has already gone beyond simple retaliatory tariffs like those imposed on U.S. agricultural producers in 2018.
Last week, China's Ministry of Commerce imposed export controls on 28 U.S. companies, including General Dynamics and Boeing, banning them from purchasing products for both civilian and military use. It also added 10 companies to its “list of unreliable companies” related to arms sales to Taiwan.
China's response is likely to include macroeconomic aspects as well. The policy could aim to land Chinese products in new markets, particularly in South America, where China recently opened a huge new port in Peru.
“There will definitely be a trade shift away from the United States,” Reinsch said. “Everything that's produced has to go somewhere. It's not going to end up on a shelf in China.”
It could also include a weaker currency to reduce costs and maintain China's overall export strategy, as well as direct stimulus from the Chinese government to support domestic product demand.
“I don't think China will retaliate any more or as aggressively as they did the first time, because they understand that the United States wants to separate from China,” said UBS's Tao Wang. But China's interest is to maintain its integration with the rest of the world.” I predicted it.
