Will Trump’s Major Victory Make America Great Again? China Faces Severe Trade Sanctions, Potentially Facing Tariffs of 60%-100%. Will Americans Really Benefit? Will Protectionism Be a Boon or a Bane for the Global Economy? Financial Economists Offer Insights.
The trade deficit between the United States and China has gradually decreased from $346.8 billion during Trump’s presidency in 2016 to $279.1 billion in 2023 under the Biden administration. Despite the ongoing protectionism, while China appears to be facing sanctions, most of the U.S. trade orders have shifted to other countries such as Vietnam, Mexico, Indonesia, and Taiwan. Former Indonesian Trade Minister Mari Pangestu pointed out that although the tariff policies of the Trump administration have redirected trade volumes towards these countries, the supply chain still predominantly relies on China.
As Trump prepares to return to the presidency, he is likely to initiate further tariffs against China, which may not only impact China but also pose additional challenges for other countries with which the U.S. has a trade deficit.
According to CNBC: Goldman Sachs noted that Trump’s victory in the U.S. elections would not only trigger fears in China but also increase the trade deficits of many Asian countries that rely on Chinese manufacturing, as tariffs rise. Asian suppliers will seek to reduce deficits by shifting their production locations within the supply chain.
Andrew Tilton, Chief Asia-Pacific Economist at Goldman Sachs, stated in a recent report that both Trump and potential appointees are likely to emphasize reducing bilateral trade deficits, thus increasing the risk of tariffs on other Asian economies outside of China. He likened this risk to a “whack-a-mole” game: once one mole is hit, another pops up. Suppliers, facing new policies, may devise countermeasures to avoid losing business, but once they relocate, they too will face tariffs.
Analysts at Barclays also pointed out that protectionist trade policies could have the most significant impact on Asian emerging markets during Trump’s second term. The tariffs proposed by Trump could have a greater effect on those countries with open economies, with Taiwan being more vulnerable than South Korea or Singapore.
In addition to the major impact of protectionism on Asian emerging economies, many market analysts in the U.S. believe that the costs will ultimately be borne by American consumers. U.S. importers, facing high tariffs, will significantly raise the prices of goods, passing those costs onto consumers. Trump’s protectionist policies are expected to lead to price increases, exacerbating inflation. A survey released by the National Retail Federation on Monday indicated that the new tariff policies would reduce American consumers’ purchasing power on products such as clothing, toys, furniture, appliances, footwear, and travel goods, estimating a loss of between $46 billion and $78 billion.
By 2025, you might be eating instant noodles for an entire year, and the price of instant noodles will also increase, so be prepared to start stockpiling food.