China and EU May Circumvent Trump's Potential Tariffs
Ahmed Moustafa
Director of Asia Center for Studies and Translation, which focuses on and analyzes deeply all current Asian affairs
Trump thought that he might reduce the trade deficit with China and others
Goldman Sachs predicts that the Trump administration's focus on reducing bilateral deficits may lead to increased scrutiny of tariffs on other Asian countries, not just China based on his campaign slogan “Make America Great Again”. The US bilateral trade deficit with China has decreased somewhat since the Trump administration, but deficits with other Asian exporters have risen significantly. Andrew Tilton, Goldman's chief Asia-Pacific economist, suggests that burgeoning bilateral deficits could prompt US tariffs on other Asian economies.
Korea, Taiwan, and Vietnam have seen large trade gains versus the US, reflecting their "privileged positions" in the semiconductor supply chain. South Korea's trade surplus with the US reached a record $44.4 billion in 2023, while Taiwan's exports to the US hit a record high of $24.6 billion in Q1 2024. India and Japan also run trade surpluses with the US, with Japan's surplus remaining stable and India's increasing moderately in recent years.
Trade policy is where Trump is likely to be most consequential for Emerging Asia in his second term as U.S. president. Trump's proposed tariffs are most likely to inflict "greater pain" on more open economies in the region, with Taiwan more exposed to that threat than Korea or Singapore. Thailand and Malaysia are expected to take a slightly larger hit.
The U.S. trade deficit with China narrowed to $279.11 billion in 2023, from $346.83 billion in 2016. However, trade volumes were channeled to third countries such as Vietnam, Mexico, Indonesia, and Taiwan. Goldman still expects continued pressure for the relocation of certain supply chains from China to Southeast Asia, especially India or Mexico.
The tariffs targeted country may contain or circumvent the impact thereof
Donald Trump's US election win has left Europe grappling with how to contain or counter highly probable tariffs on its exports to the US. Trump has threatened to revive a trade war that began during his first term in office, stating in his election campaign that he would raise tariffs on Chinese goods by 60-100% and impose a blanket 10% to 20% tariff on all US imports.
Critics of the proposed tariffs say the policy could lead to higher prices for US consumers. Analysts agree that Trump appears undeterred when it comes to trade tariffs, leaving Asia and Europe to consider ways to mitigate the future impact of export tariffs and whether to retaliate or try to negotiate a get-out deal.
Economists caution that it is uncertain whether Trump's tariffs on Europe will be as damaging as feared or whether they will simply be a bargaining chip designed to unlock wider foreign policy deals.
There have been calls in Europe for the bloc to prepare retaliatory measures now, including deeper integration of the EU services market and credible retaliatory measures against the US.Europe could also try to use the carrot instead of the stick with the U.S., suggesting three other ways Europe might try to stop, limit, or avoid Trump's likely tariff policy altogether.
Another scenario may take place as well, and according to the general saying: "enemy of my enemy is my friend" a hidden alliance between EU and China, and it could be the other Asian aggrieved states of Trump's tariffs may join to expel USA whether to mitigate or to deprive the deeper economic impact of US potential tariffs.
The damaging consequences of potential Trump's Tariffs
Trump's proposed 60% tariffs on goods made in China and a 20% tariff on imports from other nations are aimed at boosting American jobs, reducing the federal deficit, cutting food prices, and generating revenues to subsidize childcare.
However, history shows that tariffs rarely lead to long-term job creation in industrial sectors. In 2018, after Trump imposed steel tariffs, many US companies were forced to raise prices or cut jobs due to the skyrocketing costs of raw materials.
Trump's proposed 60% tariffs on Chinese-made goods will not stop American companies from seeking cheaper alternatives abroad, as global supply chains are more agile than ever. Chinese manufacturers can sidestep tariffs by partnering with factories in other nations, labeling their products as "Made in Vietnam" or "Made in Egypt."
Tariffs on a wide range of imports, especially from China, will affect countless industries, making US goods more expensive domestically and less competitive internationally.
The plan risks destabilizing global trade networks, as higher prices and slower economic growth in the US could lead to consumers spending less, companies investing less, and overall economic activity contracting.
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