The Atlantic Council: What to expect as Trump's trade war zeroes in on China

https://www.atlanticcouncil.org/content-series/fastthinking/what-to-expect-as-trumps-trade-war-zeroes-in-on-china/



He’s hitting the brakes and the gas. On Wednesday, US President Donald Trump announced that he would suspend until July many of the “liberation day” import tariffs that had gone into effect hours earlier, but also raise the tariff on China to a whopping 145 percent—while keeping the 10 percent global tariff in place. The news caused markets to jolt upward, after having lost trillions of dollars in value in the past week, but they plunged again on Thursday as the full details became clear. Below our experts dig into what these changes mean for the global economy—and American consumers.



Bond bust

While the US stock market has shed trillions of dollars in value since Trump announced the “reciprocal” tariffs on April 2, stocks did not move the US president to react. Instead, Josh tells us, “Trump saw the massive disruptions in the bond market and decided risking the entire US—and global—financial system was too high a price to pay for the reciprocal tariffs.”

Rising bond yields and a falling US dollar were too alarming for Trump to ignore. “The president prioritized the reserve currency over a trade war waged using a particularly flawed calculation mechanism and rhetoric that inflamed anti-US sentiment even among the United States’ longest and most trusted allies,” says Barbara.

While allies will feel at least temporary relief, it’s unlikely American consumers will, Josh concludes. The GeoEconomics Center team calculates that the overall tariff rate for the United States is nearly as high as it was before Trump’s Wednesday reversal because of the higher levy on China. “Trump launched a global trade war and then decided—at least for now—to zero in on China,” Josh says. “But don’t expect the rest of the world to rush to help the US given the whipsaw of the past week and tariffs they are facing. Remember: if Chinese goods can’t come into the US market, they’ll quickly flood other economies.”

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