The US president paused his 'reciprocal tariffs' reducing them across the board to 10% except for China after a week of turmoil in global markets wiped trillions off the value of shares. He said he would however continue to maintain punitive tariffs on China which he raised to 125% after Beijing had earlier raised its tariff on US imports to 84%. But can Trump win this trade war which has been likened to a high stakes game of poker in which he may not hold all the cards?
Trump's stated aim in his trade war and widespread tariffs is to reduce the US deficit with other trading partners and bring manufacturing back to the United States. But this cannot be achieved in the short term.
The US is reliant on imports from around the globe, not only in terms of food and goods but also the raw materials with which it relies upon to build products in the US. There are countless examples, but some key imports include rubber, steel, metal and other raw materials. It is almost totally reliant upon other countries for rubber. In 2024, the United States imported $1.68Bn of rubber, being the 269th most imported product. Its top suppliers include China, Canada, Mexico, Korea, Rep. and Thailand, all of which have been hit with high tariffs.
Likewise the United States is also a significant importer of steel and aluminium. Canada, Brazil, and Mexico are its top suppliers of steel while it relies upon other countries for its much needed aluminium. Around half of all aluminum used in the US is imported, with the vast majority coming from its neighbour Canada.
The list is virtually endless and whichever way one looks at it the US manufacturing industry as it stands is reliant upon foreign imports.
The other overlooked factor is the cost of the US workforce. While some globalists will point to the iniquity of wages paid to workers in China, Bangladesh, Vietnam and India, the fact is that should the products they supply be made in the US the cost of wages would likely make such products cost prohibitive. An Apple iPhone currently costs anywhere between "600 and a little over $1000. With the 125% tariffs placed on Chinese imports this will double. But should that same iPhone be made in the US, with current wage structures and other factors the cost could be over $3500 according to some reports [CBS].
Wedbush Securities tech analyst Dan Ives points to many things that the Trump administration appears to overlook, even putting aside the time it would take for the likes of Apple to relocate to the United States.
"Saying we can just make this in the USA is a statement that incredibly understates the complexity of the Asia supply chain and the way electronics, chips, semi fabs, hardware, smartphones, etc. are made for US consumers over the last 30 years," he said.
While the US produces rubber, primarily synthetic rubber, with about 920,000 tonnes produced annually, the country imports almost all its natural rubber. Both types are integral to tyre manufacture so the US car manufacturing industry is reliant on foreign supplies.
Trump's war on China could have a number of effects. There is a risk that if products were unable to enter the US, Chinese firms could seek to "dump" them abroad. While that could be beneficial for some consumers, it could also undercut producers in some countries and threaten jobs and wages.
However, this might be too simplistic. China's exports to the US account for only 2.9% of the country's GDP. This is significant in cash terms but it would be a loss that China could easily absorb should it stop supplying the United States altogether.
Trump, through his punitive tariffs may intend to force China to kowtow to his will. But it risks irreversibly damaging the US economy.
Trump paused his tariffs as it was observed that US treasury bonds were being sold off. China holds at least a fifth of US debt and it is speculated that China was playing a trump card by selling off some of its holdings. Economists have long thought that China cannot afford to do this since it would damage its own economic standing. However China has been building its reserves in gold for a significant period and may be willing to weaponize its US treasury holdings.
Should China unilaterally stop exporting to the US, this too would cripple the economy. Retail shelves in the US would likely be empty inside 6 weeks, and the impact on the US economy would be debilitating. China dominates the global rare earth supply chain and without them the US chip industry would collapse. The US military, along with various other sectors, is highly dependent on rare earth elements for critical technologies, and China's dominance in their production and processing creates a significant vulnerability for the US.
Another key import is that of pharmaceutics. China exports many active pharmaceutical ingredients for America's drug industry in terms of key medicines China supplies 95% of US imports of ibuprofen, 70% of acetaminophen, and 40-45% of penicillin. The migraine experienced by some Wall Street traders over the last week may become a bigger headache if there isn't a painkiller or prophylactic.
Across Europe the main indices have seen significant losses over the last month with the FTSE down 7%, the CAC40 down 10% and the Dax down 8.9%. The US indices rose on the back of Trump's tariff pause but have yet to regain what they lost in the last week and into Thursday's open showed further losses. Both of China's main indices have seen some drops but they have remained relatively stable throughout Trump's trade war on the world.
Trump may on the surface appear to be the strong man in the room as he increases the stakes by placing a 125% tariff on Chinese imports, but China is in it for the long game and may have many more cards to play.
tvnewswatch, London, UK
Trump's stated aim in his trade war and widespread tariffs is to reduce the US deficit with other trading partners and bring manufacturing back to the United States. But this cannot be achieved in the short term.
The US is reliant on imports from around the globe, not only in terms of food and goods but also the raw materials with which it relies upon to build products in the US. There are countless examples, but some key imports include rubber, steel, metal and other raw materials. It is almost totally reliant upon other countries for rubber. In 2024, the United States imported $1.68Bn of rubber, being the 269th most imported product. Its top suppliers include China, Canada, Mexico, Korea, Rep. and Thailand, all of which have been hit with high tariffs.
Likewise the United States is also a significant importer of steel and aluminium. Canada, Brazil, and Mexico are its top suppliers of steel while it relies upon other countries for its much needed aluminium. Around half of all aluminum used in the US is imported, with the vast majority coming from its neighbour Canada.
The list is virtually endless and whichever way one looks at it the US manufacturing industry as it stands is reliant upon foreign imports.
The other overlooked factor is the cost of the US workforce. While some globalists will point to the iniquity of wages paid to workers in China, Bangladesh, Vietnam and India, the fact is that should the products they supply be made in the US the cost of wages would likely make such products cost prohibitive. An Apple iPhone currently costs anywhere between "600 and a little over $1000. With the 125% tariffs placed on Chinese imports this will double. But should that same iPhone be made in the US, with current wage structures and other factors the cost could be over $3500 according to some reports [CBS].
Wedbush Securities tech analyst Dan Ives points to many things that the Trump administration appears to overlook, even putting aside the time it would take for the likes of Apple to relocate to the United States.
"Saying we can just make this in the USA is a statement that incredibly understates the complexity of the Asia supply chain and the way electronics, chips, semi fabs, hardware, smartphones, etc. are made for US consumers over the last 30 years," he said.
While the US produces rubber, primarily synthetic rubber, with about 920,000 tonnes produced annually, the country imports almost all its natural rubber. Both types are integral to tyre manufacture so the US car manufacturing industry is reliant on foreign supplies.
Trump's war on China could have a number of effects. There is a risk that if products were unable to enter the US, Chinese firms could seek to "dump" them abroad. While that could be beneficial for some consumers, it could also undercut producers in some countries and threaten jobs and wages.
However, this might be too simplistic. China's exports to the US account for only 2.9% of the country's GDP. This is significant in cash terms but it would be a loss that China could easily absorb should it stop supplying the United States altogether.
Trump, through his punitive tariffs may intend to force China to kowtow to his will. But it risks irreversibly damaging the US economy.
Trump paused his tariffs as it was observed that US treasury bonds were being sold off. China holds at least a fifth of US debt and it is speculated that China was playing a trump card by selling off some of its holdings. Economists have long thought that China cannot afford to do this since it would damage its own economic standing. However China has been building its reserves in gold for a significant period and may be willing to weaponize its US treasury holdings.
Should China unilaterally stop exporting to the US, this too would cripple the economy. Retail shelves in the US would likely be empty inside 6 weeks, and the impact on the US economy would be debilitating. China dominates the global rare earth supply chain and without them the US chip industry would collapse. The US military, along with various other sectors, is highly dependent on rare earth elements for critical technologies, and China's dominance in their production and processing creates a significant vulnerability for the US.
Another key import is that of pharmaceutics. China exports many active pharmaceutical ingredients for America's drug industry in terms of key medicines China supplies 95% of US imports of ibuprofen, 70% of acetaminophen, and 40-45% of penicillin. The migraine experienced by some Wall Street traders over the last week may become a bigger headache if there isn't a painkiller or prophylactic.
Across Europe the main indices have seen significant losses over the last month with the FTSE down 7%, the CAC40 down 10% and the Dax down 8.9%. The US indices rose on the back of Trump's tariff pause but have yet to regain what they lost in the last week and into Thursday's open showed further losses. Both of China's main indices have seen some drops but they have remained relatively stable throughout Trump's trade war on the world.
Trump may on the surface appear to be the strong man in the room as he increases the stakes by placing a 125% tariff on Chinese imports, but China is in it for the long game and may have many more cards to play.
tvnewswatch, London, UK
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