The United States and China are on the brink of a trade war collapse because Beijing declared its readiness to fight until the end after Donald Trump threatened to increase Chinese product tariffs nearly to 100%. Such a move by Trump would impose a staggering 104% tax on almost all Chinese imports. The majority of Chinese exports to the United States include smartphones, laptops, lithium-ion batteries, toys and gaming consoles but also encompasses industrial boilers and screws. The situation becomes extremely critical as Trump approaches his Wednesday deadline. Who caves first?
The Conference Board’s China Center expert Alfredo Montufar-Helu predicts that China will not show any signs of weakness. The U.S. would gain additional leverage for concessions if China decides to back down. The current deadlock requires businesses to prepare for extended economic damage. Global markets are already reeling. Asian stock markets experienced their worst decline in decades when Trump implemented broad tariffs that affected nearly every country last week. China responded to the situation by imposing 34% retaliatory tariffs on Tuesday despite a minor market recovery. Trump’s counter? A 50% hike if Beijing doesn’t yield.
The upcoming wave of tariffs on Wednesday will impose rates exceeding 40% throughout Asia with 54% targeting China and 46% targeting Vietnam and 49% targeting Cambodia. The rapid pace of this blitz has created widespread panic among governments and firms and investors who lack sufficient time to adjust. The global economy faces a devastating blow according to Montufar-Helu who describes the situation as more than brinkmanship. The United States claims it seeks to level the trade field against China’s decades-long advantage yet Beijing remains determined to endure the pressure. The situation will either lead to increased tensions or China might attempt an infrequent reduction of conflict. The fate of markets together with the lives of millions of people remains uncertain.
