Editor's note: US President Donald Trump said in his previous speech that the retaliatory tariffs will start on April 2, and the tariffs on agricultural products will also take effect on April 2. The final direction of the tariff policy has become the focus of attention.
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. U.S. President Donald Trump previously announced that starting on April 2, he will implement retaliatory tariffs on all trading partners. As this date approaches, the final direction of Trump's tariff policy is generating significant attention. To discuss these issues, we invited Bai Ming, a member of the Academic Degree Committee of the Ministry of Commerce's Research Institute, along with Feng Jianlin, Chief Economist at FOST, for their insights. Welcome both of you.
【Anchor】First, we note that Trump officially announced last Wednesday at the White House that a 25% tariff will be levied on all foreign-manufactured vehicles and take effect on April 2. This seems inconsistent with earlier expectations that he would adopt a more lenient approach on tariff policies. Mr. Feng, what is your view on this?
Regarding the tariffs set for April 2, including those on vehicles, there is a lot of strategic flexibility involved. Currently, this appears to be a tactical move aimed at encouraging negotiations with various countries. After negotiations, he may present certain requirements; if these countries can meet them, he may reduce the tariffs. There is substantial negotiation involved in this process. Moreover, this is a dynamic situation. The imposition of tariffs is part of a long-term strategy. If you look at his goals, they are aimed at long-term objectives, which cannot be achieved in just one or two months or even half a year. These issues may persist throughout his presidency for several years to come, leading to many variables in the future. Overall, it's a protective measure for his industries. As I mentioned, this process could take quite a while. While he states that the maximum tariff is 25%, he hasn't fixed that figure specifically for vehicle tariffs. His stance is significantly firmer regarding this issue, as he hopes to encourage the return of certain industries. On the matter of retaliatory tariffs, he has some flexibility;If other nations lower their tariffs, the U.S. may reciprocate. There is room for negotiation. He sets a certain tariff level to encourage specific industries to return, which is essential for achieving his goals. Therefore, his attitude is relatively strong on this matter.
【Anchor】Exactly. Mr. Bai, what is your take on Trump's changing attitude toward tariff policies? Earlier, some U.S. media quoted officials indicating that the scope of retaliatory tariffs may be narrowed to only account for about 15% of countries with trade imbalances. What are your thoughts on this?
Trump's stance often fluctuates. The calculation of retaliatory tariffs is particularly complex because there are thousands of goods from each country that must match with thousands of American goods, including their tariff codes. We have to determine which tariff rates are higher or lower and what the differences are for the U.S. to impose retaliatory tariffs to make up for those differences. This calculation is quite complicated; some say it could take about six months to complete. If it takes six months just to calculate tariffs given that a presidential term is only four years, it seems very restrictive. However, if he focuses on countries with significant trade volumes with the U.S. and substantial trade deficits with them, then concentrating efforts on imposing retaliatory tariffs on those countries may prove to be more efficient.
【Anchor】Yes. Mr. Feng, what do you anticipate the final reciprocal tariff measures to look like when they are implemented on April 2? Do you expect there to be room for negotiation?
To determine the ultimate direction of the tariff policy, we need to consider the objectives behind the tariffs. The Trump administration's goals regarding tariff policies are quite diverse. For instance, they hope to use tariffs to address issues like drug trafficking and immigration, using tariffs as leverage for negotiation on specific problems. This is a strategic move.If it resolves those issues, they may not need to discuss them further. Additionally, there is a desire to protect so-called strategic and technologically critical industries. The U.S. wants to develop these industries, such as steel and aluminum, telecommunications, and copper, which may all be subject to increased tariffs. Furthermore, they hope to encourage certain industries to return to the U.S., such as the automobile and pharmaceutical sectors, by imposing tariffs to bring these supply chains back to American soil. This isn't merely about strategic security; it's more about ensuring that the U.S. possesses these industries.
Another angle is the promotion of trade balance. If foreign countries charge higher tariffs, the U.S. also aims to impose retaliatory tariffs to create equilibrium. Here, the goal might be to increase tariffs on others while also encouraging them to lower their own. Another objective is to bolster domestic revenue through tariffs, enabling support for domestic tax reductions. Additionally, from a geopolitical standpoint, the U.S. seeks to implement tariffs to facilitate economic decoupling, using tariffs in part to attain this goal.
Thus, when assessing the direction and intensity of Trump's tariffs and whether there will be room for future negotiations, we should focus on the underlying goals of these tariffs.
【Anchor】Yes. Which specific countries and industries should we pay particular attention to regarding these tariff measures?
The key focus should be on countries and regions with significant trade surpluses with the U.S., such as the European Union, China, Canada, and Mexico. Industries like automobiles and pharmaceuticals have been specifically mentioned and are likely to be areas of heightened scrutiny due to their potential impact.
【Anchor】OK. Concurrently, the implementation of retaliatory tariffs on April 2 is a significant concern for China. Mr. Bai, what are your thoughts on how this will affect China?
China has already faced tariffs, so the overall impact of additional retaliatory tariffs may not be particularly large, given that China is already dealing with high tariff rates. When comparing the tariff differences between the U.S. and China, it is likely that the U.S. would find its tariffs are higher than China's rates. It is clearly unfeasible for the U.S. to drop its tariffs to match China's lower rates. However, there are many countries and regions that have either no tariff records or very low rates, which makes it easier for the U.S. to identify those tariff differences. Based on these disparities, the U.S. intends to impose tariffs to balance this out, aiming to reduce its trade deficit through retaliatory tariffs.
【Anchor】Mr. Bai, what do you anticipate other countries or regions will do in response to the U.S. reciprocal tariff measures once they are implemented? Is there a possibility of retaliatory tariffs, and could this trigger a trade war?
There is certainly a possibility of such a response. For example, the European Union has already indicated its readiness to retaliate, while some countries are expressing their readiness to retaliate while also engaging in negotiations. Take Canada and Mexico, for instance; they have delayed imposing tariffs as the U.S. engages in discussions with them. Additionally, some countries, such as India and Vietnam, are reportedly trying to improve relations with the U.S. by lowering some tariffs on imported goods from the United States, especially since Vietnam relies heavily on the American market. Therefore, each country is adopting different strategies based on its own situation.
【Anchor】Trump's tariff policies have also impacted capital markets. Previously, a relaxation of Trump's tariff policies led to a rebound in the U.S. stock market, but after he announced tariffs on automobiles, the stock market experienced a significant decline on that day. Mr. Feng, what do you expect the impact of these formal tariff measures to be on the economy and the stock market?
After this round of tariffs, the existing international economic and trade order will likely further undergo significant restructuring. This encompasses the political order as well; he is challenging the established international political order, which will also undergo changes. Of course, this situation presents an opportunity for China. There is potential for China to strengthen ties with the EU, Japan, and ASEAN, allowing for the establishment of relatively positive economic and trade relations and maintaining a stable arrangement. This represents an opportunity for China and, by extension, for us as well.
From the perspective of the U.S., they seem to be isolating themselves from the international industrial chain and economic order. If this occurs, it could significantly harm the long-term national interests of the U.S. The impact on the stock market is evident; I personally believe this situation will be negative for the stock market. Of course, there are many factors that influence the ultimate trajectory of the market, but regarding this specific factor, I think it will likely have a negative impact. This adverse effect will continue for some time until all of his major assertions are realized, and the stock market gradually digests this information before finally moving towards a new equilibrium.
【Anchor】Mr. Feng, given the current situation, how should we evaluate the short-term and medium-to-long-term impacts of the tariff policy on the United States?
Trump is aware that the short-term impacts are manageable within economic forecasts. As for the medium-to-long-term effects, particularly regarding inflation, we need to consider how quickly these tariffs are implemented—whether they are imposed all at once or gradually over time. If the tariffs are imposed all at once, some economic theories suggest that it won't lead to inflation because inflation is, as per the IMF ,defined as a persistent increase in prices. A one-time increase does not constitute inflation.
However, If the process of imposing these tariffs continues intermittently throughout his term—imposing them on one set of products today and another set tomorrow—this could indeed lead to persistent fluctuations in prices. From what we can see now, I am inclined to believe that the situation will fall somewhere between these two extremes. Initially, there will likely be a significant impact, followed by prolonged effects that continue for some time.
As for his goals, such as promoting the reshoring of industries, these objectives will be quite difficult to achieve. The current international division of labor in the industrial chain has its own supporting rules. It is challenging to artificially reverse such a large trend through tariffs. Even during the previous administration, when some tariffs were imposed, the intended goals were not realized. This time, I believe that promoting industrial repatriation and domestic production in the U.S. is also highly unlikely to be achieved. Based on current data, this remains our preliminary analysis.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang. Thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung | Translated: Kato Ip | Proofread: Chris Liu
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