Trade between the two largest economies in the world – a link that has defined the global economy for two decades – is On life support. American prices on China is now 145%; China’s prices in the United States stand at 125%. And it’s just the reference base, without additional rate Specific goods such as steel (in the case of the United States) or agricultural products (in the case of China).
“The rate rates are now so high that they are prohibitive of most direct bilateral exchanges,” said Yeling Tan, professor of public policy at the University of Oxford.
Even Beijing recognizes that with prices, high goods, American goods have no chance. “Given that American products are no longer marketable in China in current rate rates, if the United States is still increasing the prices on Chinese exports, China will not take these measures,” said the country’s finance ministry a declaration announcing its new tariffs of 125%.
The prices quickly take place a close economic relationship: Chinese manufacturers have built products, from garden chairs and Christmas ornaments until smartphones And semiconductorsAnd American consumers and companies have bought them.
Washington and Beijing have reported that they are open to negotiations, even if there is no public sign that they are talking about. Everyone thinks that the other needs to move first; Friday morning, Cnn reported That the United States, rather than requesting a telephone call with XI, demanded China in place should request a phone call with Trump.
The United States may have realized that its steep prices on China are not durable. Friday evening, the White House exempt Electronic products such as smartphones, laptops and computer processors of American prices, including some imposed on China.
Prices and trade
The United States imported $ 438 billion in China goods in 2024, compared to $ 143.5 billion in China exports, according to US Census Bureau data.
The 145% price of Trump on Chinese imports is only the basic line. There is also 25% Prices on steel and aluminum imports, and imminent threat From a 25% rate on any country that uses Venezuelan oil, a set that includes China. And then there are all previous prices Colded by previous administrations: on Chinese household appliances, solar panels and electric vehicles.
Beijing also slapped Additional prices On American products, such as heavy machines, oil, gas and agricultural products. He also imposed a range of other non -pricing barriers; For example, on Friday, Chinese officials said they Reduce the number of American films Approved for screening in China.
If the current situation persists – 145% of prices on China, 10% on all others – Western and Chinese companies will probably accelerate their desire to create manufacturing centers outside of China in countries like Vietnam, India and Mexico.
The problem is that Trump’s commercial hawks want to relax the “China plus one“Strategy. Trump’s “Liberation Day” High slapped prices On countries like Vietnam and Cambodia that have attracted Chinese investments. Managers such as Trump Peter Navarro sales advisor want governments target Chinese trade as a condition for reducing prices.
Vietnam proposes to repress Chinese products traveling through its territory as part of tariff negotiations with the United States, Reuters reports Citing a government document and an anonymous source.
Then there is the risk that Trump cannot conclude an agreement with the business partners and the return of the “Liberation Day” prices. “The factories that have already moved to connectors will probably increase production to take advantage of the break, but there could be fewer investments to fear that prices are increasing in” more “countries,” suggests Tan.
China’s steep prices also encourage American companies that export to the second world economy to consider their own diversification of the supply chain. Friday, China Semiconductor Industry Association assertive That companies did not need to pay prices on American chips and token manufacturing equipment as long as they were manufactured in a third location.
China tends
Trump officials argue that China is much more vulnerable to a trade war than the United States, arguing that the Chinese economy is based on the American consumer. If the United States firmly its doors, China will have no one to sell and the economy will collapse.
The White House also insists that Trump’s price break was A deliberate strategy to isolate China while opening negotiations to the rest of the world. “You could even say that he acted in a bad position,” the Treasury Secretary Scott is said on Wednesday to journalists; He also suggested the United States and its allies can work together To put pressure on China on trade.
In truth, China is less based on the United States now than in the first Trump administration. Less than 15% of Chinese exports go directly to the United States, against around 19% in 2018. Beijing has also cultivated alternative sources for what it imports from the United States, such as Brazil and Australia for agricultural products. Beef exports in Australia to China in the past two months are Already up 40% in annual shift.
“China has options,” says Brown, noting that China’s largest trading partner is now in Southeast Asia. “It is not indebted in the United States in a way in the past.”
To be clear, economists expect China to take an economic blow from Trump prices, with banks like Citi And Goldman Sachs Cut their 2025 GDP forecasts for the second world economy.
However, Beijing takes a daring position in his fight with the United States, spokespersons saying that China will be “fight until the end“If the United States persists in a trade war.
Aside from posture, Beijing could be in a safer position than Trump’s trade war in the United States stock markets,, Bond returns hikeAnd sink the American dollar– And that’s before Inflationist effects Prices have seriously struck.
Dexter Roberts, a non -resident principal scholarship holder to the Global China Hub of the Atlantic Council, explains that “people in China really feel like” eating bitterness “, referring to a Chinese sentence which means persevere by difficulties.” It plays in their difficult stance. I think they believe that, in the end, if someone will flash, it will be the United States ”
Roberts adds that, at least from the point of view of Beijing, the First Trade War never really ended. The Biden administration has maintained Trump’s previous prices on Chinese products in place. Biden also imposed its own prices, as a 100% price on Chinese electric vehicles, and – perhaps more boring in Beijing – targeted the technological sector of China with measures like Exporting the prohibitions of the American chip.
This means that Beijing has been on a “trade place” since 2016. China has established commercial relations with other markets, has found new sources to replace American products and invested in its own technological companies. “China is preparing for a world with less access to the American market for several years now,” says Tan.
And a trade war, although painful, could accelerate some of the other Beijing priorities. “In a strange way, this is somehow integrated into the long -term Beijing objectives of transition from their economy far from its dependence to the west and exports,” said Roberts.
However, China cannot easily move its export markets to other regions such as Europe, the Middle East or Southeast Asia. On the one hand, these regions – even have developed markets like Europe – really do not have the same consumption potential as the Americans. Then there is The risk of flame return. “These countries are wary of faced an increase in Chinese imports diverted from the American market,” warns Tan.
Deal or not Deal?
Economists are largely suitable for a complete decoupling between the United States and China would be extremely painful for the two countries. Prices of more than 100% are “absolutely punitive”, explains Iain Osgood, professor of international relations at the University of Michigan. “There are many companies in the United States that may not be surviving. Even large retailers will just fight.”
This could mean that in the end, the two parties will try to find a way to reduce things – or the United States could unilaterally reduce some of its prices as the pain begins to strike. Even then, the prices are not likely to be removed at the level before 2024, not to mention the level before 2018. Osgood thinks that the prices could be brought back to a relatively more “sensitive” level, perhaps between 15% and 30%.
However, the rapid escalation of the trade war in the United States-China raises an uncomfortable question: what the world looks like when its two largest economies refuse to take care of each other?
A world where Beijing and Washington cannot defuse could be dangerous. Trade relations due to the presence of foreign companies and nationals really have a “temperature influence”, says Roberts, even if the idea is sometimes over-played. “If you are more and more isolated and you have no trade relations … The probability of conflict increases definitively.”
“In the end, the fate of the two giant savings will remain interspersed. A collapse of direct bilateral trade will harm companies and consumers in both countries, ”explains Tan.
“It will be a much more volatile world.”
This story was initially presented on Fortune.com
