The US will remain biggest victim of Trump's new tariff policies

Editor's note: Jin Jun is associate professor at the School of Management, Zhejiang University. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity. 

A comprehensive analysis integrating China's customs export data, the share of Chinese exports in key industries in the U.S. market, and a recent quantitative study by the Peterson Institute for International Economics suggest that if the new Trump administration imposes a 60 percent tariff on imports from China, the U.S. economy will suffer a heavy blow. A tariff hike of this magnitude would trap both parties in a tariff-driven trade war, halting bilateral trade between China and the U.S.. Suspended China-U.S. bilateral trade will exert three major negative impacts on the industrial production and overall economy of the U.S., with repercussions lasting for years.

First of all, the study by the Peterson Institute for International Economics indicates that the U.S. agriculture, forestry, and fisheries sectors would suffer the most severe and prolonged setbacks. 

Second, nearly 60 percent of Chinese exports to the U.S. consist of intermediate goods rather than final consumer products. The U.S. industries, such as automobile, machinery, pharmaceuticals, and electronics, heavily rely on raw materials, intermediate goods, and components from China. Therefore, production in these sectors would slow down or even come to a halt, ultimately disrupting market supplies for these products and services. For example, over 75 percent of vitamins B6, B12, B1, and C, and nearly 70 percent of vitamin E in the U.S. come from China. China is also a critical supplier of raw materials for antibiotics and antipyretic analgesics. If unable to import these vitamins from China, U.S. pharmaceutical companies would struggle to manufacture related products. Similarly, if China ceased exporting auto parts to the U.S., it would be hard to find substitutes of comparable quality and quantity for around 15 percent of the parts needed for production and maintenance in the short term. Similar disruptions would occur for electronic components, rubber, steel, and aluminum products. The resulting shortages and price hikes for raw materials and components would impact related business production and the normal operations of the service sectors concerned, leading to factory shutdowns and job losses.

Third, the absence of affordable, high-quality made-in-China products such as fabrics, clothing, household items, and furniture in the U.S. market would influence the supply of these products. While the U.S. could seek to increase production by manufacturers in countries like Vietnam, Bangladesh, and India, the sharp rise in transshipment trade from China to the U.S. via Vietnam and Mexico in recent years has demonstrated that companies in these nations cannot replace Chinese enterprises in terms of their status and roles. Consequently, the U.S. would face more severe inflation, and American citizens would not be able to enjoy high-quality life at low prices as they did before. Adapting to a more frugal lifestyle is far more challenging than shifting to a more extravagant one. Downgrading the quality of life would instigate social conflicts and bring social unrest to the U.S..

With the advancement of China's Belt and Road Initiative and the growth of the Global South, China will continue expanding into these markets and increasing exports, offsetting declines in shipments to the U.S.. Meanwhile, the U.S. general imposition of 10 percent tariffs on global partners will reduce its trade, negatively impacting its domestic economy. This shift will create new opportunities for China's trade expansion, mitigating the effects of Trump's new tariffs on the country.