The US has imposed a 104% tariff on Chinese imports, which could be the largest tariff the country has ever imposed on a foreign nation, sending shockwaves through financial markets and diplomatic circles alike.
China’s response was swift and emphatic: “China and the rest of the world are determined to fight a trade war to the end,” officials declared, adding that intimidation, threats, and blackmail are no way to deal with Beijing.
Despite American confidence in the sanctions, some analysts argue the impact may be more complex than it first appears. It has been questioned if the White House is under the impression that China lags behind the US economically, hence the bravado to impose hefty levies.
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Kevin Bambrough, founder of Sprott Resources, pointed out that when measuring tangible output—such as electricity generation, automobile production, and steel output—China outperforms the US by a significant margin.
“I actually think China’s economy is probably more like double the USA,” Bambrough states, citing lower labor costs and higher volumes of goods produced. He also notes that in China, basic services remain inexpensive, contrasting sharply with higher costs in the US market.
He further noted that China has recently sold $50 billion worth of US Treasury bonds. Some believe it could raise borrowing costs in the US, while others say China risks damaging its own economic interests by reducing its stake in American debt.
But the bond sell off is expected to hit the US economy significantly, including placing downward pressure on Treasury prices as the market absorbs a large supply of bonds at once.
China at the same time indicated that it will again retaliate to the latest round of retaliatory tariffs, this time raising tariffs on American goods to a combined 84%, which is slated to go into effect on April 10.
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