Beginning February 4, Trump’s new tariffs on Chinese products are expected to cause some “pain” for Americans. The 10% tariffs on Chinese goods will be in addition to any tariffs on China that already exist. 

While talking about tariffs on China, Canada and Mexico, Trump wrote “THIS WILL BE THE GOLDEN AGE OF AMERICA! WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” on X. 

The sweeping scope of these tariffs means they will impact a diverse array of sectors and items:

• Consumer Electronics: Products such as smartphones, computers, and televisions are expected to experience price hikes.
• Textiles and Apparel: Imported clothing and footwear from China will be affected by the new tariffs.
• Machinery and Equipment: This category includes industrial machinery and manufacturing equipment, which will also see cost increases.
• Toys and Sporting Goods: These items, predominantly sourced from China, will incur higher expenses.

The 2025 tariffs are on top of the tariffs the United States already has in place from the first Trump administration. The Section 301 tariffs, implemented during Trump’s first term, were still largely in effect in 2023 and beyond. These tariffs include:

1. Tariffs of 10% or 25% on a significant portion of Chinese goods.
2. As of 2023, the U.S.’ average effective tariff rate on Chinese goods was about 11%, up from 3% in 2018.

The new 10% tariff announced by Trump is additive to these existing tariffs. This means that:

1. Many Chinese products already faced tariffs of either 10% or 25%.
2. The new 10% tariff is being applied on top of these existing tariffs, potentially leading to a significant cumulative effect on trade with China.

It’s important to note that the tariff situation has been complex and evolving, with different rates applying to various product categories. The United States Trade Representative (USTR) had also initiated a review of the tariffs in May 2022, with results expected to be issued in 2024.

In response, China has announced retaliatory measures. The Chinese government will impose 15% tariffs on U.S. coal and liquefied natural gas imports, as well as 10% tariffs on crude oil, agricultural equipment, and large-engine vehicles. These countermeasures are set to take effect on February 10, 2025.

How Tariffs Work

Tariffs are taxes imposed on imported goods, typically calculated as a percentage of the price paid by the importer. 

Why Governments Impose Tariffs

Governments may impose tariffs for several reasons:

• To raise revenues
• To protect domestic industries
• To protect domestic consumers
• To protect national interests

Mechanism of Tariffs

Collection Process: In the United States, tariffs are collected by Customs and Border Protection agents at 328 ports of entry across the country. When a company imports goods, it pays the tariff directly to the U.S. government. 

Passing on Costs: Tariffs are ultimately paid by U.S. importers, not foreign countries, and these costs are often passed on to American consumers through higher prices.  Estimates suggest that Trump’s tariffs could cost a typical middle-class household more than $2,600 per year.

Why Is Trump Imposing Tariffs on China

Stated Reasons for Tariffs on China

1. Fentanyl Crisis: 

Claim: Trump claims that China has failed to stem the flow of fentanyl precursor chemicals to criminal cartels, contributing to the opioid epidemic in the United States.

Fact Check: While it’s true that China has been a significant source of fentanyl precursor chemicals, the effectiveness of tariffs in addressing this issue is questionable. Recent data shows that fatal overdoses from fentanyl and other street drugs have actually decreased by more than 21% since June 2023, before Trump’s return to office.

2. National Security: 

Claim: The administration argues that the flow of contraband drugs like fentanyl through illicit distribution networks has created a national emergency and public health crisis.

Fact Check: The link between tariffs and national security in this context is tenuous. Economists argue that tariffs are not an effective tool for addressing drug trafficking or border security issues.

3. Trade Imbalance: 

Claim: Trump has long criticized the trade deficit with China and sees tariffs as a way to address this issue.

Fact Check: While the U.S. does have a significant trade deficit with China ($270 billion in the first eleven months of the previous year), economists generally agree that tariffs are not an effective solution to trade imbalances. In fact, previous tariffs imposed during Trump’s first term did not significantly reduce the trade deficit.

4. Intellectual Property Theft: 

Claim: The administration accuses China of engaging in unfair trade practices, including the theft of U.S. intellectual property.
Fact Check: While concerns about intellectual property theft are legitimate, the effectiveness of broad tariffs in addressing this issue is debated. More targeted measures, such as the “small yard, high fence” strategy adopted by the Biden administration, may be more effective.

China’s Move to Help with Fentanyl Crisis

China increased its efforts in international cooperation with the United States on the fentanyl crisis, particularly in late 2023.

In November 2023, during a summit between President Joe Biden and President Xi Jinping, China agreed to restart cooperation with U.S. authorities to counter the flow of fentanyl and other synthetic opioids and their precursors into the United States.

As part of the renewed cooperation, a joint U.S.-China counternarcotics working group was recreated. This working group held its first meeting in January 2024, with high-level Chinese officials promising ambitious outcomes. The group serves as a key mechanism for coordinating bilateral efforts to counter the global manufacturing and trafficking of illicit synthetic drugs, including fentanyl.

China has shown increased willingness to collaborate in several law enforcement areas:

• Acting on U.S.-provided intelligence about Chinese drug networks
• Agreeing to control pill press exports, which are crucial for producing lethal, fake pills.
• Promising to cooperate with the United States in anti-money laundering (AML) efforts, including having representatives from Chinese banks attend side meetings.

China’s Role in the Fentanyl Crisis

Until 2019, China was the primary source of finished fentanyl for the U.S. illegal market. Chinese brokers, both criminal and operating within the legal economy, shipped fentanyl directly to U.S. dealers, often using postal and courier services.

In May 2019, after years of diplomatic pressure from the U.S., China scheduled the entire class of fentanyl drugs, imposing stricter regulatory controls. This action led to a significant decrease in the direct flow of finished fentanyl from China to the United States.

Following the 2019 regulations, Chinese trafficking networks shifted their focus to supplying precursor chemicals, which are the more elemental chemicals used to manufacture fentanyl. China became the primary producer of these precursor chemicals, which are then shipped to other countries, particularly Mexico, for fentanyl production.

In November 2023, China agreed to restart cooperation with U.S. authorities to counter the flow of fentanyl and other synthetic opioids. This led to several actions:

• Adding new substances to China’s control list.
• Implementing regulations on chemicals that can be used to manufacture fentanyl.
• Cleaning up and closing online platforms where fentanyl and precursor chemicals were traded.
• Cooperating on multiple cases with U.S. drug law enforcement.

Overdose deaths from synthetic opioids, including fentanyl, increased significantly during both Trump and Biden administrations. During the peak of the opioid crisis in 2022 and 2023, overdose fatalities reached approximately 114,000 deaths annually.

However, recent data from the CDC shows that U.S. overdose deaths decreased in 2023 for the first time since 2018. Overdose deaths involving opioids decreased from an estimated 84,181 in 2022 to 81,083 in 2023.

The amount of fentanyl seized at the southern border dropped by about 20% in 2024, and the potency of fentanyl pills also saw a notable decline. The Biden administration has seized more fentanyl than any other administration in history.

Trump Tariffs During the First Administration

During his first administration, President Trump implemented significant tariff measures on Chinese imports as part of his trade policy. 

The Trump administration used Section 301 of the Trade Act of 1974 to impose sweeping tariffs on Chinese goods:

• In July 2018, a 25% tariff was imposed on $34 billion worth of Chinese imports.
• In August 2018, an additional 25% tariff was placed on $16 billion worth of Chinese goods.
• In September 2018, a 10% tariff was imposed on $200 billion worth of Chinese products.
• In May 2019, the 10% tariffs were increased to 25%.
• In September 2019, a 15% tariff was imposed on $112 billion of imports.

By the end of Trump’s first term, tariffs covered approximately $360 billion worth of Chinese imports.

Reasons for the Tariffs

During his first administration, President Trump imposed significant tariffs on Chinese imports for several key reasons:

Economic Concerns

Trump’s primary motivation for implementing tariffs on China was to address what he perceived as unfair trade practices and economic imbalances:

• Trade Deficit: Trump aimed to reduce the substantial U.S. trade deficit with China, which stood at around $346 billion in 2016. Despite the tariffs, the trade deficit reached a record high of $419.2 billion in 2018 before going back down to $345 billion in 2019. In 2020, the deficit further decreased to $310.8 billion.

The following is the total trade deficit with China per year:

2015: Not provided in the search results

2016: $346 billion

2017: $375.6 billion

2018: $419.2 billion

2019: $345 billion

2020: $310.8 billion

2021: $353.5 billion 

2022: $382.9 billion

2023: $279.4 billion

• Job Protection: The administration argued that Chinese trade practices were responsible for the loss of U.S. manufacturing jobs.
• Intellectual Property Theft: Trump accused China of engaging in “the greatest theft in the history of the world” regarding intellectual property.

National Security Concerns

The administration also framed its China trade policy in national security terms:

• Technology Competition: There was particular concern about companies like Huawei and the potential security risks they posed.
• Economic Security: Trump’s advisors argued that “economic security is national security,” linking trade policy with broader national security objectives.

Trump believed these tariffs would compel China to make significant changes to its economic practices, boost U.S. manufacturing, and create jobs for American workers.

Did the Tariffs During Trump’s First Administration Have the Effect He Wanted Them To

The tariffs implemented during Trump’s first administration did not fully achieve the intended outcomes he had hoped for. 

The tariffs had mixed effects on the U.S. economy:

• GDP and Jobs: Studies suggest that the tariffs had a negative impact on overall economic growth and employment. The Tax Foundation estimates that Trump’s tariffs reduced long-run GDP by 0.2 percent and resulted in the loss of 142,000 full-time equivalent jobs
• Trade Deficit: Despite Trump’s goal of reducing the trade deficit, it actually increased during his term.

Total trade deficit by year:

2015: $745.48 billion

2016: $503.27 billion

2017: $543.33 billion

2018: $593.08 billion

2019: $578.50 billion

2020: $626.39 billion

2021: $858.24 billion

2022: $971.12 billion

2023: $773.4 billion

• Steel Industry: After imposing a 25% tariff on imported steel in 2018, employment in the U.S. steel industry actually decreased from 84,000 in 2018 to 80,000 by 2020.
• Overall Employment: A study commissioned by the U.S.-China Business Council claimed that Trump’s trade policies cost the United States 245,000 jobs.
• American firms and consumers bore the vast majority of the tariff costs, not foreign exporters.

• Tariffs on imported washing machines may have created about 1,800 new U.S. jobs at Whirlpool and other manufacturers.
• The global tariffs on steel reportedly created over 4,000 new American jobs.

Deficit growth during Biden’s term:

As the U.S. economy rebounded from the COVID-19 pandemic, consumer demand surged. This led to increased imports, outpacing export growth:

• In 2021, imports rose sharply to $3,826.9 billion, while exports increased more modestly to $3,053.5 billion.
• The goods deficit reached a record $1,061.7 billion in 2023, reflecting strong consumer spending on imported products.

Supply chain issues and shipping bottlenecks contributed to higher import costs and trade imbalances:

• Shortages of key components like semiconductors led to increased imports of finished goods.
• Transportation costs spiked, affecting trade flows and pricing.

Changes in trade relationships affected the deficit:

• The U.S.-China trade deficit decreased to $279.4 billion in 2023, the lowest since 2010.
• However, deficits with other countries like Vietnam increased, partially offsetting the reduction with China.

The trade deficit declined in 2023 due to:

• Slowing consumer demand as inflation concerns grew.
• Increased U.S. energy exports.
• A slight moderation in the strength of the U.S. dollar.

Increased Domestic Production

In certain industries, the tariffs appeared to boost U.S. production:

• President Trump’s tariffs on steel and China “reduced imports of affected steel products by 24 percent…and increased U.S. production of steel products by 1.9 percent.”

China Tariffs During Trump’s First Term

China implemented a series of retaliatory tariffs on the United States, which affected everything from farmers to manufacturers. On April 4, 2018, China announced 25% retaliatory tariffs on 106 U.S. products worth $50 billion, including 33 agricultural products valued at approximately $16.5 billion.

This led to:

• Soybean farmers suffered greatly, with exports to China falling by 94% in 2017.
• Overall, U.S. agricultural exports decreased by $27 billion from mid-2018 to the end of 2019 due to retaliatory tariffs.
• The Trump administration responded by creating the Market Facilitation Program, which provided $23 billion in bailout money to farmers affected by the tariffs.

The banking sector serving U.S. farmers reported an increase in late payments, with the share of bankruptcies rising by 30%.

Trump then subsidized American farmers. Farmers in the Midwest were known to say they were waiting for their “Trump money.”

• The Trump administration authorized a total of $28 billion in aid for farmers subjected to unfair trade practices.
• Farm subsidies increased dramatically, from $4 billion in 2017 to over $20 billion in 2020.
• These subsidies were so significant that they exceeded the annual cost of maintaining U.S. nuclear forces.

Impacts of the Current United States and China Tariffs

The 10% levy on Chinese goods is projected to pass on approximately $40 billion in additional costs to American consumers this year.This increase will likely affect a wide range of products:

• Electronics: Smartphones, monitors, bar code scanners, space and water heaters, air conditioners, refrigerators, and freezers
• Textiles: Clothing, bedding, and blankets
• Household items: Lamps, paint, brooms, electric batteries, iron stovetops, and vacuum-sealed water bottles
• Other goods: Sports equipment, toys, video and card games, rubber footwear, and party decorations

U.S. imports from China were already down 21% in 2023 from their 2018 record of $538.5 billion. The average effective tariff rate on Chinese goods rose from 3% in 2018 to about 11% last year, even before the additional 10% levy.

China has announced retaliatory measures, including:

• 15% levies on American coal and liquified natural gas
• 10% levies on American crude oil, agricultural equipment, and some large trucks1

These counter-tariffs are estimated to put 12% additional effective tariffs on about $14 billion of goods.

Broader Economic Implications

1. Economic Growth: The tariffs are expected to weaken economic growth for both the U.S. and its trade partners.
2. Job Market: There is potential for job losses in affected sectors.
3. Supply Chain Disruption: The comprehensive nature of these tariffs risks disrupting supply chains and global trade flows.
4. Trade War Escalation: The situation could potentially escalate into a broader trade conflict, destabilizing international markets.
5. Sector-Specific Impacts: The largest potential impacts are expected in the agriculture, automotive, and energy sectors.

Future Outlook

The situation remains fluid, with ongoing negotiations between the U.S. and China. The current 10% additional tariffs on Chinese goods are significantly lower than the 60% levies Trump had previously suggested during his campaign, indicating potential for further escalation. The ultimate impact will depend on how quickly trade negotiations progress and whether the tariffs are reversed or maintained in the long term. It’s important to note that economic projections are inherently uncertain and actual outcomes may differ from these estimates.

Job Losses in Import-Dependent Industries

Many industries that rely on imported goods or materials are likely to face job losses due to increased costs:

• The automotive sector could see significant job cuts, with more than 550,000 workers at car dealerships representing international brands at risk.
• Manufacturing industries using imported steel, aluminum, and other materials may reduce their workforce due to higher production costs.
• Companies in electronics and other sectors relying on imported parts may need to scale back production, leading to fewer shifts and potential layoffs.

Potential Job Gains in Protected Industries

Some sectors may see job growth or stability due to tariff protection:

• The steel and energy sectors might experience employment growth as they are shielded from foreign competition.
• Domestic industries that compete directly with imported goods could potentially expand and hire more workers.

Long-Term Considerations

It’s important to note that while tariffs may protect some jobs in the short term, they can have negative long-term consequences:

• Tariffs can reduce economic efficiency and harm overall competitiveness, potentially leading to more job losses over time.
• The disruption of global supply chains can make it harder for businesses to operate efficiently, potentially resulting in further job cuts.