Volkswacht Bodensee - Trump's China tariffs eclipse first term, more hikes likely: analysts

The unpredictable White House returnee railed against major US trading partners during his campaign, vowing to impose blistering measures on China once elected.

After just six weeks in office, the new tariffs -- which Trump says are retaliation for Beijing's failure to stem the devastating US fentanyl crisis -- already surpass those of his first term.

"(This is) a move we see as signalling an aggressive stance," wrote Ting Lu, Chief China Economist at Nomura.

Tuesday's step adds to another blanket 10 percent tariff imposed last month, lifting average US levies on Chinese imports to around 33 percent, according to estimates by Nomura.

"The tariff hikes that Trump has completed on China are nearly double the size of the tariff hikes during his entire first term," wrote Lu.

Leaders in China -- an export powerhouse that has failed to achieve a strong post-pandemic economic recovery -- are nervously eyeing a renewed trade war with the United States under Trump.

The rubber-stamp National People's Congress is convening in Beijing this week for a key annual political conference, during which officials will hash out plans for how to boost the sluggish economy and respond to US tariffs.

Growth in the first quarter of the year is at risk of slowing, wrote Zichun Huang of Capital Economics.

"And that's before the hit from tariffs is felt in earnest," said Huang.

"Unless the leadership unveil greater-than-expected stimulus at the National People's Congress, it is hard to see how a slowdown can be avoided this year," she added.

- 'Crosshairs' -

Trump's first few weeks in office have seen him hit Canada and Mexico with even higher 25 percent tariffs, which also came in force on Tuesday.

And his initial salvos against China of two 10 percent tariffs are lower than the much more drastic 60 percent rate threatened during the campaign.

That has been interpreted by some as a sign that Washington is adopting a softer approach than expected in managing its rocky relationship with Beijing.

But experts say that China is likely to represent the new Trump administration's primary economic and geopolitical foe in coming years -- something that is obscured in recent weeks by domestic US issues and major developments in the Russia-Ukraine war.

"While Trump has shown some inclination towards making a fresh 'deal' with China on trade lately, the big picture is that the country is still very clearly in his crosshairs," said Thomas Mathews of Capital Economics.

"The threat of tariffs, export controls, investment restrictions, and the like is still a big downside risk, in our view, for investors in China's markets," he added.

Observers are also anticipating a tougher response by Beijing, which retaliated last month with targeted measures including 15 percent duties on US coal and liquefied natural gas.

Condemning the latest tariffs, Beijing vowed Tuesday that it will take retaliatory measures that will "resolutely safeguard its own rights and interests".

- More coming -

"US-China tensions may take centre stage in the coming months," said Lu of Nomura.

"This probably won't be the final tariff hike on China," wrote Julian Evans-Pritchard of Capital Economics, noting that Trump has threatened to impose "reciprocal" tariffs on various countries as soon as early April.

"China is not an obvious target for reciprocal tariffs given that it has lower duties on the US than vice versa," said Evans-Pritchard.

But there are other ways for Trump to further aggravate the trade war, he said, such as through targeted levies on specific goods similar to those imposed under his predecessor Joe Biden.

Trump may also seek to terminate China's status of having "permanent normal trade relations" with the United States, a move that would push the average levy on Chinese goods to above 40 percent, he added.

Chinese state-backed tabloid Global Times reported Monday that Beijing is now considering implementing its own measures in response to Trump's tariffs, citing "reliable sources".

"I think the policymakers and exporters in China already anticipated higher tariffs in the United States, and made plans accordingly," said Zhiwei Zhang, President and Chief Economist of Pinpoint Asset Management.

F.Stadler--VB