Trump says he might lower tariffs on China. Unless the number comes way down, experts say it won't matter
Rates would need to drop to 10 or 20 per cent in order for trade to return to some kind of normalcy: experts
The White House has indicated that it could lower its tariffs on China, but experts say the exact figures might not make much of a difference.
Right now, the U.S. has 145 per cent blanket tariffs on Chinese goods, while China has a 125 rate on U.S. goods. The levies jumped to those levels earlier this month when both countries were engaged in a tit-for-tat raising of rates.
U.S. President Donald Trump told reporters Tuesday during a news conference that tariffs would "come down substantially," but wouldn't disappear completely. According to a report by the Wall Street Journal, one White House official said the Trump administration was considering cutting the rates from 145 per cent to somewhere between 50 and 65 per cent.
Eric Miller, international trade consultant and president of Rideau Potomac Strategy Group, says those figures are not enough of a decrease to make any real difference.
"While the levels of tariffs coming down are welcome, they're not going to be significant enough to get the vast majority of trade back flowing again," Miller said.
Miller says the current rates of 145 per cent are no different than a 1,000 per cent tariff — both effectively shut off trade between the countries.
Serious economic pain
Under the current levels, Miller says U.S. importers of Chinese goods are now expected to pay almost $1.50 in tax for every dollar's worth of products they're bringing into the country. "So by definition, they're starting that process at a loss. That means that really nobody is going to be bringing goods in from China after a while," Miller said.
He says that that's already hurting American businesses, especially those that make things in the U.S. and rely on supplies or materials from China.
Any rates on China above 20 per cent (which is a rough average of how high Trump raised them during his first presidency) will cause serious economic pain, according to Miller.
"Once you start getting up … above 20 per cent, there's a declining number of goods, really, that can be economic at those levels," Miller said.
Under 50 or 60 per cent blanket tariffs, Miller says American companies would still be in a rush to move production out of China to avoid the measures.
Certain industries — like clothing, for example — would be effectively priced out of the market at 50 per cent, Miller says.
According to a 2024 report by the U.S. International Trade Commission, the U.S. imported $79.3 billion US of apparel from China in 2023, which accounted for 21 per cent of all clothing imports. Miller says that because many fast fashion retailers make their clothes in China and sell them at very low cost in the U.S., these hypothetical lower rates could still raise clothing prices dramatically, effectively ending fast fashion for U.S. consumers as they know it.
And assuming China matched the U.S.'s tariff rates, Miller adds that American companies that export to China (like farmers who usually sell billions of dollars in soybeans to China a year) would also find themselves priced out.
China not backing down
Anne Stevenson-Yang, co-founder of J Capital Research and author of Wild Ride: A Short History of the Opening and Closing of the Chinese Economy, agrees with Miller that a reduction to 50 or 60 per cent would make little difference. She says anything more than 50 per cent essentially functions like a trade embargo.
But while the U.S. says rates could fall, any kind of trade deal remains far off. The Trump administration previously indicated it was in talks with China about a possible trade deal, though Chinese officials have come out since then to say there have been no discussions so far.
Stevenson-Yang says China has been "masterful" so far in sending a public message that it will not bend to Trump. She says outside of a scenario where a few big Chinese companies came out with plans to invest in the U.S., China will not back down first.
When it comes to whether or not tariffs will drop back to what they were pre-trade war, Miller says the odds are "pretty low," given the Trump administration's goal is to bring manufacturing back to the U.S.
But Pau Pujolas, an associate professor of economics at McMaster University in Hamilton, says the magic number is likely zero, as any tariff rate between the two largest trading partners would have a big impact.
And even if the tariffs were to go away completely, he says damage would still be done because it generated uncertainty in the economic system for businesses trying to make new investments, and for consumers deciding whether or not to make big purchases.
"Ultimately, the exact number of the tariff that we get is going to be important, but it's not going to [cause] the majority of the damage," Pujolas said.
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