China Begins Retaliation with 84% Tariff on U.S. Goods
As the U.S.-China trade war escalates, China announced on April 9 an 84% retaliatory tariff on U.S. goods, responding to the Trump administration’s implementation of a 104% tariff policy the previous day. According to White House officials, the tariffs imposed by the U.S. on Chinese goods have now reached 145%.
U.S. Treasury Secretary Scott Bessent emphasized in an interview on April 10 that the United States holds an absolute advantage. In addition to tariffs, Bessent pointed out that China must confront the fentanyl issue and warned that any attempt by China to devalue the yuan would only harm itself.
Ongoing Tariff Tug-of-War Between U.S. and China
The tug-of-war over tariffs continues, with the following dynamics unfolding between the two nations:
- On April 9, China announced an 84% tariff on American goods.
- Trump promptly announced a 104% retaliatory tariff on Chinese goods.
- White House officials stated that U.S. tariffs on Chinese goods have reached 145%.
In response, Bessent criticized, “China does not want to return to the negotiating table but has chosen confrontation, which will only increase its own harm.”
The U.S. Demands China Strictly Control Fentanyl and Punish Drug Traffickers
Bessent pointed the finger at the drug problem during the interview: “More than 100,000 Americans die from fentanyl each year, and China is the root cause.” He urged China to adopt the same punishment standards for domestic drug traffickers (which can include the death penalty) to demonstrate sincerity in resolving the issue.
The Objectives of Tariffs Are Multifaceted
When asked about the purposes of these tariffs—whether to combat drugs, increase tax revenue, or bring supply chains back to the U.S.—Bessent replied, “All of the above. We are taking a multi-pronged approach. Tariffs, tax reforms, and border control are all part of the effort to restructure the U.S. economy.”
Manufacturing Relocation Will Take Time; Supply Chain Shifts Cannot Happen Overnight
Regarding the issue of Americans being accustomed to purchasing cheap Chinese goods, Bessent admitted, “Shifting the global supply chain back to the United States is not an overnight process, but we are working to expedite this by signing trade agreements with allies such as Japan, South Korea, and Vietnam.”
Trump Intensifies Tax Reform Agenda; Congressional Approval Expected by Late May
In addition to tariffs, Bessent revealed that Trump is actively lobbying Congress to advance tax reform proposals, which include:
- Tax exemptions on tips.
- The potential for a millionaire tax.
- Coordinated handling alongside the debt ceiling.
He emphasized that the current progress is “very smooth” and confirmed that Trump is personally working this week to mediate divisions within the Republican Party.
Corporate Concerns Amidst Short-term Volatility
In response to concerns about companies hesitating to finance, mergers being stalled, capital expenditures shrinking, and CEOs refraining from providing forecasts for 2025, Bessent reassured, “This is a periodic deleveraging, not a systemic risk. It’s just temporary volatility, and will stabilize once a trade agreement is reached.”
He added that upcoming deregulation in the banking sector will further boost confidence, including relaxing capital thresholds and making it easier for banks to purchase U.S. Treasury bonds.
Bessent Warns China Against Deliberate Yuan Devaluation
Bessent also cautioned that if China were to intentionally devalue the yuan, it would lead the world into a vicious cycle of “competitive devaluation and taxation,” which would benefit no one. “If China plans to sell off U.S. debt, it would strengthen the dollar and, in turn, lead to a stronger yuan, ultimately harming themselves,” he stressed.
The Yuan Cannot Become the World Reserve Currency; The Dollar Remains Strong
In response to rumors that the dollar’s dominant position may be shaken, Bessent dismissively stated, “How can a country that uses its own currency as a weapon expect people to trust its money?” He emphasized that the U.S. will maintain a strong dollar policy and pointed out that military spending and fiscal stimulus in Europe and Japan will further strengthen the dollar’s foundation.
Biden’s Administration Leading to Economic Recession; Trump Administration’s Relaxation of Restrictions to Promote Private Development
Facing market expectations of a U.S. economic recession, Bessent acknowledged that the U.S. did experience a technical recession under Biden’s administration. However, he pointed out that the current government aims to “de-government” the economy, while promoting cuts in fiscal spending, downsizing, and relaxing financial restrictions to let private enterprises drive economic development again.
Trump’s Comprehensive Approach: Trade, Tax Reform, and Financial Deregulation
In summary, the Trump administration is employing a comprehensive approach to tackle trade and economic challenges:
- Trade War: Increasing tariffs and pressuring China.
- Tax Reform: Promoting tax exemptions on tips, lowering middle-class tax burdens, and potentially introducing a wealthy tax to gain consensus in Congress.
- Financial Deregulation: Relaxing banking regulations, expanding sources for U.S. Treasury purchases, and reducing government intervention.
Finally, Bessent reiterated regarding the current market volatility, “We are in the process of deleveraging, but it will quickly stabilize. President Trump’s upcoming new round of policies will again drive the U.S. economy.” However, it remains unclear whether the market will respond positively or whether China will make concessions.
Risk Warning
Investing in cryptocurrencies carries a high level of risk, and their prices may be highly volatile. You may lose your entire principal. Please assess the risks carefully.