Background on Donald Trump and His Trade Policies
Since taking office in January, President Donald Trump has initiated a trade war against allies and rivals, shaking up the global economy. Among those most affected is China, which has faced additional tariffs of up to 145% on its products. In response, China imposed tariffs of 125% on US goods.
Trump’s Optimism Amidst Trade Talks
Despite the economic turmoil, Trump expressed optimism on social media about progress in trade talks with Japan. The Japanese envoy to Washington stated that the US aims to reach an agreement within 90 days. Prime Minister Shigeru Ishiba acknowledged that the dialogue with Washington “won’t be easy,” but emphasized Trump’s commitment to prioritize the negotiations.
Trump’s Strategy and Concerns
Trump believes his strategy of imposing tariffs will lead to trade agreements with multiple countries, reducing barriers for US products and shifting global manufacturing to the United States. However, tensions between Washington and Beijing escalate, raising concerns about widespread disruption.
Jerome Powell, the Federal Reserve Chairman, warned that Trump’s tariffs are “very likely” to cause a temporary increase in US prices, with effects that “could be more persistent.” He also highlighted market volatility during a period of significant uncertainty.
This instability was evident on Wall Street, with the Nasdaq plummeting over 4%, the broader S&P more than 3%, and the industrial Dow Jones above 2%.
Nvidia, a leading semiconductor company, experienced a significant drop of over 10% after disclosing that new US export restrictions on chips, imposed as part of Trump’s conflict with China, would cost billions.
“Stop Threatening”
While the rest of the world has received a universal tariff of 10%, China urged the US to “stop threatening and blackmailing” after the White House transferred responsibility for initiating negotiations to Beijing.
“There are no winners in a tariff war or trade war,” said Lin Jian, a spokesperson for China’s Ministry of Foreign Affairs. “China does not want to fight, but it is not afraid to.”
Despite this dispute, China’s economy grew by 5.4% in the first quarter, a better-than-expected result that does not yet reflect the effects of the tariff escalation initiated in April. However, Heron Lim from Moody’s Analytics told AFP that the impact would be felt in the second quarter as tariffs begin to “hinder Chinese exports and slow investment.”
Ngozi Okonjo-Iweala, Director-General of the World Trade Organization (WTO), warned that uncertainty caused by US tariffs “threatens to stifle global growth, with severe negative consequences for the world, particularly for vulnerable economies.”
According to WTO’s annual forecasts, global merchandise trade could experience volume declines of up to 1.5% by 2025.
Symbol of Impact: Shein’s Price Increase
The Chinese online retail platform, Shein, informed its customers of an upcoming price increase starting April 25 due to recent changes in global trade rules and tariffs.
Japan as a Test Case?
Following Japan, delegations from South Korea and Indonesia are expected in Washington. South Korea, a significant exporter of semiconductors and automobiles, announced that its Finance Minister, Choi Sang-mok, will meet with US Secretary of the Treasury Scott Bessent next week.
Stephen Innes from SPI Asset Management believes that success in Japan talks would serve as a “warning signal.” If Japan reaches even a partial agreement, it sets a positive example. However, if negotiations fail, other nations may start pricing confrontation rather than cooperation.
Political Risks at Home
Although popular among Republicans, Trump’s tariff war is politically risky domestically. California Governor Gavin Newsom, a Democrat, announced plans to launch new litigation against Trump’s “unilateral authority” to impose tariffs, which have caused economic chaos, driven up prices, and harmed the state, families, and businesses.
