On Tuesday, China cautioned the Trump administration against re-escalating trade tensions by re-imposing tariffs on Chinese goods next month.
Beijing also threatened retaliation against countries that forge deals with the United States aimed at excluding China from supply chains.
The June trade framework between Washington and Beijing established a delicate truce, easing immediate tensions but leaving significant ambiguities.
This agreement, while preventing a full-blown trade war, has not yet outlined the granular details regarding tariffs, intellectual property rights, and market access that are crucial for long-term stability.
As a result, traders and investors across the Pacific remain highly cautious, scrutinising every development for signs of either progression towards a more enduring detente or a potential collapse back into conflict.
The lack of clarity on enforcement mechanisms and specific timelines for further negotiations adds to this uncertainty, making it difficult for businesses to make informed decisions.
The global economic implications are substantial, as sustained trade friction between the world’s two largest economies could disrupt supply chains, depress global growth, and increase volatility in financial markets.
Therefore, the coming months will be critical in determining whether this fragile accord evolves into a robust and lasting resolution or simply delays an inevitable return to trade hostilities.
Higher tariffs on the way
US President Donald Trump announced on Monday that he will implement significantly higher tariffs starting August 1.
This comes after he previously postponed all but 10% of the April duties on most nations, allowing them time to negotiate agreements with the world’s largest economy.
With tariffs over 100%, China faces an August 12 deadline to strike a deal with the White House. Failure to do so could result in the reinstatement of import restrictions that were first imposed during retaliatory tariff exchanges in April and May.
“One conclusion is abundantly clear: dialogue and cooperation are the only correct path,” the official People’s Daily was quoted in a Reuters report.
The article was attributed to “Zhong Sheng,” or “Voice of China,” a pseudonym used by the paper to articulate its foreign policy perspectives.
Beijing’s perspective on Trump’s tariffs, described as “bullying,” was reiterated by the paper:
Practice has proven that only by firmly upholding principled positions can one truly safeguard one’s legitimate rights and interests.
Tariffs on exports
According to the Peterson Institute for International Economics, the average US tariff on Chinese exports is 51.1%, while Chinese duties on US goods average 32.6%. These figures encompass all trade between the two nations.
The paper also criticised regional economies contemplating tariff reduction agreements with the US that exclude China from their supply chains.
Last week, Vietnam negotiated a deal that reduced the tariff on goods transshipped through its territory, typically originating from China, to 20% from a previous 46%.
However, these transshipped goods will now be subject to a 40% levy.
“China firmly opposes any side striking a deal that sacrifices Chinese interests in exchange for tariff concessions,” the paper said.
If such a situation arises, China will not accept it and will respond resolutely to protect its legitimate interests.
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