“The profit margin of the Chinese export sector is between 30% and 40%,” wrote Dan Wang, China director for the think tank Eurasia Group. “If the United States imposes tariffs exceeding 35%, most of their profits will be eliminated. Whether tariffs are 70% or even 1000% makes little difference, as it prevents China from negotiating directly with the United States,” he argued.
Since taking office in January, Trump has imposed an additional 20% surcharge on Chinese goods entering the United States. This surcharge is expected to increase to 54% by Wednesday.
In retaliation, Beijing announced it will impose 34% tariffs on American products starting Thursday. The President of the United States threatened on Monday to further increase tariffs by 50% if Beijing maintains its stance.
Altogether, tariffs could reach around 115%, according to Su Yue, principal economist for China at the Economist Intelligence Unit.
“Moreover, all conversations with China regarding meetings they requested with us will be terminated,” Trump threatened.
Wang explained that although Chinese exporters now face the new reality of permanently increased export costs, it does not mean exports will cease. On the contrary, it forces exporters to find new markets and reduce the direct shipment of goods to the U.S.
Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at French investment bank Natixis, also downplayed Trump’s latest threat.
“The U.S. market is already closed to Chinese products, at least directly from China to the U.S., so [an additional 50% tariff increase] is not an effective threat,” she stated.
The decision reflects the fact that the U.S. targets China more than any other country, which “was already happening before China retaliated,” she emphasized.
China today threatened to “resolutely take countermeasures to safeguard its own rights and interests” in response to Trump’s threat.
In a statement, the Ministry of Commerce said the U.S. imposition of “so-called ‘reciprocal tariffs'” on China is “completely unfounded and a typical practice of unilateral ‘bullying.'”
“The countermeasures taken by China are aimed at safeguarding its sovereignty, security, and development interests and maintaining the normal order of international trade. They are completely legitimate,” the statement read. “The U.S. threat to increase tariffs on China is a mistake on top of a mistake and once again exposes the extortionist nature of the U.S. China will never accept this. If the U.S. insists on this path, China will fight to the end,” it pointed out.
