The US’s 104% tariff on China takes effect

The reciprocal tariff policy of the Trump administration in the United States took effect at 12:01 pm Beijing time on the 9th (0:01 am Eastern Time on the 9th). For goods made in China, the total tariff is 104%, and the trade friction between the two sides has further escalated. In order to ease the impact, more than 70 countries have requested individual negotiations, but the prospects are unclear and the impact on the global economy is difficult to estimate.

“Reciprocal tariffs are about to take effect. President Trump will negotiate with any country that calls, and the phone will keep ringing,” said White House spokesman Levitt at a press conference on April 8.

After the global unified 10% basic tariff rate was implemented on April 5, tariffs will be increased again from the 9th according to the trade situation of various countries and regions.

Trump used the president’s emergency power to initiate tariff measures based on the International Emergency Economic Powers Act (IEEPA). However, according to the US Constitution, the tariff power should be controlled by Congress. Alexander Evans, a lawyer familiar with US trade law, pointed out: “The US Constitution is entering unknown territory. The longer the tariff measures last, the more likely the government will face constitutional issues.”

China has become the main target. Since China did not withdraw its retaliatory tariffs on the United States before the 8th, the Trump administration said it would impose an additional 50% tariff on Chinese goods. The U.S. Customs and Border Protection (CBP) officially notified on the evening of the 8th that the additional 50% tariff would be implemented on the 9th.

At present, the United States has imposed a 20% tariff on all products imported from China. Together with the 34% announced on April 2 and the 50% this time, the cumulative tariff on Chinese goods will reach 104%. China vowed to “fight to the end”, hinting that further retaliatory measures may be taken.

“The president’s principle is that if the United States is attacked, it will fight back more fiercely. Therefore, the 104% tariff on China will officially take effect.” When Levitt mentioned “104%” at the press conference, market concerns about the intensification of the trade war intensified, and the stock market quickly turned from rising to falling.

The Trump administration’s policy is “execution first, then negotiation.” On April 8, Trump emphasized that South Korea and other countries did not take retaliatory measures, but chose to negotiate, and said to China, a hardliner, that he was “waiting for a call.”

Greer, a representative of the Office of the United States Trade Representative (USTR), said at a congressional hearing on the 8th that reciprocal tariffs “will be determined for each country separately.”

Seeking concessions from the other side

Trump believes that some countries will accept permanent tariffs, while some countries will reduce tariffs through negotiations. White House spokesman Levitt revealed that “70 countries have requested negotiations since the announcement of reciprocal tariffs on the 2nd.” The United States hopes to reach a favorable trade agreement and eliminate high tariffs and non-tariff barriers.

Some countries have begun to make concessions. India is negotiating with the United States to sign a bilateral trade agreement to eliminate some tariffs and adjust regulations. Vietnam is subject to a 46% tariff and is considering completely eliminating tariffs on American products.

Cambodia, which is subject to a high tariff of 49%, informed the United States on the 4th that it would reduce tariffs on 19 commodities, including whiskey, from 35% to 5%. In response, Greer said: “Most countries do not take retaliatory measures.”

In addition, the US government also mentioned certain exceptions. For example, automobiles, steel and aluminum products, which have been subject to a 25% industry tariff, will not be included in the scope of reciprocal tariffs. At the same time, products such as semiconductors and pharmaceuticals that may become the target of industry tariffs are also excluded.

Revival of domestic manufacturing in the United States?

The Trump administration stressed that high tariffs are just a “trading tool” and ultimately depend on the response of various countries.

Trump hopes to promote the revival of the US manufacturing industry. When asked whether Apple would move the iPhone production line back to the United States, White House spokesman Levitt said: “The president believes that the United States has enough labor and resources to achieve this goal.”

However, there is no winner in the chaotic tariff policy, which may trigger a global economic recession. Tariffs will not only lead to stagnation of trade activities, but also hit corporate investment and personal consumption.

The day after Trump announced the reciprocal tariffs (April 3), the Director-General of the World Trade Organization (WTO), Okonjo-Iweala, predicted that the global trade volume of goods will shrink by about 1% in 2025, which is 4 percentage points lower than the previous positive growth forecast. In the statement, it said: “There is a deep concern that the escalation of the tariff war may further shrink trade.”

Uncertainty index soared to a historical high

The uncertainty of trade policy is reflected in the “uncertainty index.” The index is calculated by American scholars based on the frequency of keywords in major media and is used to measure the predictability of trade policies. In March, the index exceeded 5,700, almost three times the peak of Trump’s first term (August 2019).

Michael Gapen, chief US economist at Morgan Stanley, warned: “Protectionism and uncertainty will cause companies to postpone or cut spending and hiring, which will lead to a potential recession.”

Due to the unclear outlook for tariffs, companies are difficult to determine the choice of production bases, which may reduce equipment investment and employment.

In addition, tariff policies may trigger inflation in the United States again.

Goldman Sachs predicts that if the actual tariff rate rises by 1 percentage point, the US core personal consumption expenditure (PCE) price index will rise by about 0.1 percentage point. Many opinions believe that the overall inflation rate in the United States will rise by more than 1 percentage point, resulting in a decline in real income and suppressing personal consumption.

The probability of a recession has risen to 60%

Based on the reciprocal tariff policy, JPMorgan Chase adjusted its global economic forecast, believing that the probability of a global recession in 2025 has risen from 40% to 60%.

Among them, the United States is the hardest hit, and it is expected that negative growth will continue in the third and fourth quarters of 2025, falling into a technical recession.

Canada is also expected to begin to experience negative growth in the second quarter of 2025, while China’s economic growth rate will slow down significantly from the second quarter. The eurozone and Japan are expected to maintain growth of about 1%, but the downside risk of tariffs still exists.

Historically, when the global economy deteriorates, central banks such as the Federal Reserve (FRB) tend to adopt monetary easing policies to stabilize the economy. However, considering that tariffs may exacerbate inflation, Federal Reserve Chairman Powell said he would not rush to cut interest rates.

The global economy is gradually falling into the quagmire of tariff wars.

Source: Nikkei