Trump’s punitive tariffs on China ‘just the opening steps’ in a long dance, say analysts

SINGAPORE/SHENZHEN – Beijing has vowed to retaliate against the

latest US tariffs,

but also left the door open for negotiations.

US President Donald Trump raised the stakes in the trade war with China on April 2 (April 3, Singapore time) by announcing an additional 34 per cent in “reciprocal tariffs” on Chinese goods that are set to take effect on April 9.

“China firmly opposes this and will take necessary measures to firmly defend its legitimate interests,” said China’s Ministry of Commerce on April 3, without announcing specific countermeasures.

The latest US tariffs

were based on “subjective and unilateral assessments” by the US, said a spokesperson for the ministry.

“History has proved that raising tariffs will not solve the US’ own problems, and will not only harm its own interests but also jeopardise the development of the global economy and the stability of the production and supply chain,” the spokesperson said in a statement.

At a regular press conference, Foreign Ministry spokesman Guo Jiakun urged the US to “rectify its wrong approach” and resolve differences through “equal, respectful and mutually beneficial” consultations with its trading partners.

The latest tariff hike, which comes after an additional 20 per cent duties were imposed earlier in 2025, is expected to deal a blow to the Chinese economy. The US, the world’s largest consumer market, was China’s second-largest export destination in 2024 after Asean.

Chinese customs data showed that China sent US$525 billion (S$700 billion) in goods to the US that year, accounting for almost 15 per cent of its total exports.

“The risk to China’s exports is higher than what the market expected,” Dr Zhang Zhiwei, president of hedge fund company Pinpoint Asset Management in Hong Kong, said of the latest tariffs.

In a note on April 3, Macquarie economists Larry Hu and Yuxiao Zhang forecast that Mr Trump’s tariffs could shave 15 percentage points off China’s exports and between 2 and 2.5 percentage points off its gross domestic product growth.

Mr Lynn Song, chief China economist at ING Bank, noted that the levies could exacerbate China’s issues with overcapacity and add to deflationary pressures in the world’s second-largest economy.

On April 2, Mr Trump also signed an order to end, from May 2, a duty-free exemption for low-value imports from China under US$800, on which Chinese e-commerce platforms such as Shein and Temu have thrived.

Dr Dan Wang, China director at consulting firm Eurasia Group, said the move will deal a heavy blow to employment, as it affects the labour-intensive segment of the export sector.

And while Chinese companies have – since the onset of the trade war in 2018 – sought to move production or route exports through third countries to dodge US tariffs, they would find it harder this time.

“With tariffs now applied to all US trade partners, the China+1 workaround is effectively closed,” said Dr Wang.

Analysts expect China to boost domestic demand and pursue other markets to stabilise growth and make up for a drop in exports.

Observers say the impact of the latest tariffs is not set in stone, as retaliatory tariffs and negotiations have yet to unfold. 

“I think this 34 per cent rate may change later. Trump and China would want to negotiate further. Depending on which side has the upper hand, the rate can go up or down,” Professor Henry Gao, an international trade expert at the Singapore Management University, told The Straits Times.

He calculated that the total US tariff rate on Chinese imports could be as high as 79 per cent, taking into account existing tariffs dating back to the first Trump administration, excluding exemptions for certain goods.

Other estimates of the average tariff rate that would apply to America’s imports of Chinese goods, once Mr Trump’s latest measures are in place, include Nomura’s “around 66 per cent” and Macquarie’s 69 per cent.

Mr Stephen Olson, a former US trade negotiator and visiting senior fellow at the ISEAS – Yusof Ishak Institute in Singapore, said of the latest tariffs: “This is not the endgame – it’s just the opening steps in what will be a protracted dance.”

China had retaliated against Mr Trump’s earlier tariffs with higher levies on American agriculture and energy exports. It has also targeted US companies that do business in China, like internet giant Google and biotechnology firm Illumina.

China has reportedly also instructed some branches of its economic planning agency to hold off on registration and approval for local firms looking to invest in the US, Bloomberg reported.

The latest tariffs will impact the supply chains of some European firms in China while raising “a great deal of uncertainty” for many others, said the European Chamber of Commerce in China.

“Any subsequent restructuring of supply chains will not be possible overnight, so it will take some time to understand the full impact that tariffs will have,” said its president Jens Eskelund in a statement.

ST has also reached out to the American Chamber of Commerce in China.

In a dramatic escalation of the trade war, Mr Trump announced on April 2 – what he dubbed as “Liberation Day” – a sweeping baseline tariff of 10 per cent on imports from all countries and reciprocal tariffs on imports from 60 countries with trade imbalances with the US. 

China had the largest trade surplus with the US in 2024, at US$295 billion. Certain Chinese goods, such as solar panels, automobiles and steel, are already subject to additional goods-specific taxes. 

Mr Olson said he expects China to respond with “forceful but proportionate countermeasures”, which could include tariffs and other measures making business more difficult for US companies that depend on the China market.

“Ultimately, the US and China are headed for the negotiating table, where they’ll try to reach some type of grand bargain on a wide range of issues. But that won’t necessarily happen soon, and I expect things to get worse before they get better,” he said.