Yan Liang
Donald Trump’s first term as U.S. president ushered in a sweeping trade war with China and his second term promises to double down on the tariffs on China. Pundits disagree on whether his campaign trail pledge to institute a 60 percent across-the-board tariff on imports from China amounts to a bargaining chip for a trade deal or a decoupling strategy.
On the one hand, Trump is known for his unpredictability and transactional inclinations, and there is a lot that he could ask from China. Some of the items that are high on his wish list may include: voluntary export restraints to reduce Chinese exports to the U.S.; more imports of U.S. farm products; more Chinese investments in the U.S. to create jobs; and additional purchases of treasuries. Trump could also request China to exert more influence on Russia, North Korea, and Iran for the United States’ geopolitical interest, and the list goes on.
On the other hand, a 60 percent tariff may not be a tactic to strike a trade deal but an integral part of the “America First” strategy. Some of the emerging signs would attest to this possibility. First, Trump has announced several key Cabinet members who clearly and forcefully denounce China as a strategic rival. These China hawks could make any pragmatic deal-making difficult. Second, Trump may genuinely believe that tariffs are paid by the Chinese side and that tariff revenues can replace other taxes to fund a downsized government. Third, Trump may be disappointed by the results of the Phase One trade deal and decide not to replay the old trick. And finally, Trump may be led to believe that the trade war would devastate the Chinese economy while solidifying the United States’ economic might.
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