Beijing has reacted to the “Liberation Day” tariffs imposed by Donald Trump by introducing its own 34% tariffs on all U.S. imports. These new tariffs align with the “reciprocal tax rate” implemented by the U.S. president on Wednesday and are set to take effect on April 10, just one day after the U.S. tariffs commence.
The announcement has had a significant impact on the U.S. stock market, causing the S&P 500 to decline nearly 6% on Friday. Companies like Boeing, which previously supplied about a third of its 737 planes to China, saw its stock drop by more than 9%. Similarly, the NASDAQ Golden Dragon China Index, which includes U.S.-listed Chinese firms, also fell around 9%.
U.S. markets tumbled following Asia’s decline, a consequence of the “Liberation Day” tariffs. In Asia, Japan’s Nikkei 225 index has decreased by 5.2% over two trading days since April 2. South Korea’s KOSPI has experienced a 1.6% drop during the same period, and India’s NIFTY 50 index fell by 1.8%. Chinese markets, meanwhile, were closed for the Qingming Festival.
The tariffs imposed by China suggest the possibility of an extended period of global protectionism, contradicting assurances from Trump’s supporters that countries would adjust to the new taxes or engage in negotiations for concessions.
Trade policy experts, like Eswar Prasad from Cornell University, criticize the approach, stating that Trump is destabilizing the international trade system, affecting relations with nearly all major U.S. trading partners.
The global trade environment has entered a phase characterized by increased protectionism and unpredictability, as noted by Singapore Prime Minister Lawrence Wong. He emphasized the weakening of global institutions and erosion of international norms, suggesting countries may increasingly act on narrow self-interest, using force or pressure in negotiations.
The Trump administration’s tariffs, often exceeding a 10% baseline, have significantly impacted the Asia-Pacific region. Southeast Asia has been hardest hit, with Cambodia and Vietnam facing 49% and 46% tariffs, respectively. China received a 34% tariff on top of a previously announced 20% rate. In contrast, Australia, New Zealand, and Singapore only faced a 10% baseline.
Goldman Sachs has downgraded GDP forecasts across the Asia-Pacific, with Vietnam potentially experiencing the largest decline, with growth projections falling to 5.6%. Taiwan’s forecast was also reduced, reflecting the impact of a 32% tariff.
HSBC predicts that Trump’s tariffs could decrease China’s GDP growth by 1.5 percentage points. Though other Asia-Pacific countries are unlikely to adopt retaliatory actions similar to China, many aim to avoid escalating tensions.
Australia, for example, will not retaliate against the U.S. tariffs, choosing not to engage in a tit-for-tat response. South Korea is expected to offer more concessions, potentially participating in projects or increasing purchases of U.S. agricultural products.
President Trump has claimed that Vietnam is prepared to reduce tariffs to zero, while Cambodia has proposed lowering tariffs on various imports to 5%. Additionally, Taiwan has announced $2.7 billion in aid for local manufacturers affected by the tariffs.
Van Jackson, an expert in international relations, argues that the U.S. cannot regain economic dominance in the region. Moreover, the absence of a clear leader in international trade is concerning. Without U.S. leadership, countries may realign trade strategies, creating new partnerships and alliances.
The Philippines, which faces a 17% tariff, views this as an opportunity to gain market share, particularly in exporting chips, electronics, and coconuts to the U.S. Countries in Asia may seek to develop new trading relationships, possibly with Europe or the Middle East, to mitigate the impact of restricted U.S. market access.
In China, there is a push for companies to expand overseas, potentially benefiting the country’s export sector. However, some industries—such as automobiles or green energy—may face pushback from foreign governments.
Economists have warned about a potential “tariff cascade,” yet it’s believed that China will continue to be a major global supplier. Meanwhile, Beijing might benefit from appearing stable and reliable compared to the U.S. approach.
Austin Strange of the University of Hong Kong suggests that China could gain favorable public perception by maintaining stability during this period of upheaval in global trade.
