White House's mixed signals on China tariffs raise concerns

Donald Trump initiated a trade war with China during his first presidential term by imposing a series of tariffs on the world's second-largest economy. At that time, he imposed tariffs reaching 25% on goods valued at $350 (CAD 496) billion. The Biden administration has maintained these tariffs, and some have even been increased, according to Barrons.

In February of this year, Trump imposed an additional 10% tariff on all Chinese imports, citing reasons such as fentanyl and China’s involvement in trafficking this drug. He then raised these rates by an additional 10%. Prior to Wednesday’s announcement, this meant that the tariff rate on some goods from China was already 45%.

During a briefing for journalists before Trump's announcement, officials did not provide detailed information on the new rate for China under the so-called "reciprocal tariffs." They only mentioned that new tariffs would be layered on existing ones. A high-ranking administration official explained that the rates "are customised to each country" based on "very, very well established methodologies."

Trump mentioned China in his speech but did not provide a specific number. However, the list of individual tariffs distributed during the event and published on government social media accounts contained this information. The administration calculated that China effectively imposes a 67% tariff on the U.S., considering both tariffs and non-tariff barriers such as currency manipulation, export subsidies, and unfair regulations. This number was then halved – Trump described it as a "discount" – and rounded up to 34%.

Neither the president nor the executive order clarified whether this number was to be added to the existing 45% tariffs on imports from China. In response to a question from a Bloomberg TV reporter about whether the rate for China would exceed 50%, Treasury Secretary Scott Bessent answered affirmatively. However, the reporter did not inquire about the 25% tariffs introduced during Trump’s first term. Including Wednesday’s announcement, Trump added 54% in new tariffs in his second term.

A White House representative, who requested anonymity, initially confirmed in an email that the 34% reciprocal tariff would be added to the existing 45%. This would mean a new rate of 79% for goods already subject to full tariffs.

However, ten minutes later, the same official corrected the information, claiming that the rate for China was 54%, not 79%, because "Venezuelan tariffs" were not yet in effect. This was likely a reference to Trump's threats to impose 25% tariffs on countries importing oil from Venezuela, including China.

After further clarification, the final response was that the United States would impose tariffs of up to 79% on some Chinese goods when the new tariff package comes into effect. A White House official commented on the whole confusion with: "With everything else that unfolded today this seems like a pointless aside to spend any energy on."

Andy Rothman, a longtime China observer and head of the Sinology organization focused on China, expressed his concern over the lack of clarity: "They haven't provided their homework," he stated. He also added that the lack of details regarding the reciprocal tariff could complicate China's potential response.

The question of whether these reciprocal tariffs would add up was one of the key issues raised by investors and analysts before the announcement. After the event, Henrietta Treyz, Director of Economic Policy Research at Veda Partners, noted that uncertainty regarding the rate for China was particularly evident. Rothman also admitted that he felt bewildered by the whole situation.