Opinion China’s retaliation to Trump tariffs adds fuel to a global trade war

The slapping of a 34 per cent duty by China on all goods imported from the US is striking for how fast it came — just two days after US President Donald Trump, on April 2, unveiled his so-called reciprocal tariff policy. While that policy supposedly addresses what the US President terms as “asymmetries in trade relationships” with other countries, it follows and reinforces his earlier actions explicitly aimed at China. Trump had, in early February, imposed a 10 per cent blanket additional tariff on Chinese imports, which was doubled to 20 per cent a month later. Adding the latest 34 per cent reciprocal tariff takes the total duty on Chinese goods entering the US to 54 per cent. Chinese retaliation was swift, even as the world was digesting Trump’s country-specific reciprocal tariffs.

That China is at Trump’s receiving end is also apparent from the high tariffs (46-49 per cent) he has levied on Vietnam, Laos and Cambodia, besides Indonesia (32 per cent), Bangladesh (37 per cent) and Sri Lanka (44 per cent). These are countries where Chinese firms have established manufacturing facilities, for leveraging their lower labour costs as well as rerouting exports to circumvent US tariffs. A lot of the increased exports from Vietnam to the US have come from Chinese companies, which had relocated production there after Trump hit China with tariffs during his first term in 2018. This time around, he hasn’t stopped at China, but has targeted Beijing’s extended supply chain and made it virtually impossible to get around his tariffs by using other countries as conduits. This has added fuel to a global trade war, whose belligerents happen to be the world’s top two economies.

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Things could worsen if China were to make up for the loss of its merchandise exports to the US ($438.9 billion out of a total $3.6 trillion in 2024) through currency devaluation or dumping in other markets. Others too — be it the export-dependent southeast Asian economies or even the US, shut out of the Chinese market — may adopt similar beggar-thy-neighbour measures. One hopes better sense will prevail and all sides — especially Trump and Chinese president Xi Jinping — sit at the negotiating table soon. For India, however, hope cannot be a strategy. It should definitely not be a party to any trade war or revert to protectionism. On the contrary, rationalising and simplifying its import tariffs — the various additional customs duties and cesses must go — would attract global companies to make in India through competitive sourcing of intermediate inputs and adding value. In an unstable world, India can offer itself as a beacon of purposive reform, macroeconomic prudence and policy stability.