How China is fighting U.S. tariffs

(Source – The Hindu, International Edition – Page No. – 10)

America’s New Trade Policy and Its Global Impact

• In the past three months, a major economy launched an aggressive “national-first” trade policy, using trade as a tool to force concessions from partner countries.

• A key feature of this policy was “reciprocal tariffs” aimed at eliminating what it considered unfair trade practices.

• However, on the day these tariffs were to start, implementation was delayed by 90 days for 57 countries, with only one major country excluded from this postponement.

• The main goal of this delay was to push targeted countries to enter bilateral trade agreements and reduce their trade deficits with the initiator country.

Escalation into a Trade War

• One major economy immediately opposed the tariffs and responded with equal tariffs.

• In retaliation, an additional 50% tariff was imposed, taking the total to 104%.

• The other country then raised tariffs to 125%, resulting in a countermeasure of 145%.

• Despite the trade war, critical electronic imports like computers, smartphones, and semiconductors were excluded from the tariffs, showing heavy dependence on these imports.

• There was internal confusion in the government about whether electronics tariffs would be included, creating policy uncertainty.

Strategic Pause and Bilateral Deals

• The 90-day delay was part of a strategy to negotiate favorable deals using tariff threats as leverage.

• The idea was to force countries to lower tariffs and make trade more balanced.

• However, the current administration had changed how it negotiated—centralizing decision-making and sidelining the official trade negotiating agency.

• This made it hard to finalize agreements, especially given the large number of countries (57) and the wide range of issues involved.

• A recent report identified various trade barriers in these countries, suggesting major policy changes would be needed to meet demands.

Impact on Developing Countries

• For example, one developing country would have to open agricultural markets, reduce subsidies, change food distribution systems, and amend patent laws affecting medicine availability.

• It would also be required to change rules on data storage and genetically modified food imports.

• These demands are seen as unfair and hard to meet.

Response from a Major Asian Economy

• A key Asian economy retaliated strategically by reducing its export dependence on the aggressive trade partner—from 19.2% in 2018 to 13.5% in early 2025.

• It increased trade with regional partners like ASEAN and other major countries.

• It holds two strong cards: control of 92% of global rare earth mineral production and large holdings of foreign treasury bonds, which it has reduced significantly since 2018.

Need for Global Coordination

• The risk of global economic disruption is high.

• Major economies must come together to promote multilateral trade rules and discourage unilateral trade measures.