By Stephen Ndegwa
In a volatile escalation of economic rhetoric, U.S. President Donald Trump has imposed 10 percent tariff on Chinese-made goods and 25 percent tariff on goods from Canada and Mexico, starting February 1. This announcement, framed within the accusation that China is facilitating the distribution of fentanyl, a highly potent synthetic opioid, in Mexico and Canada, has reignited global concerns about fresh trade wars and their far-reaching consequences.
Trump's clubbing China with "abuser" countries underscores his administration's aggressive trade posture. However, amidst this fiery rhetoric, China's stand, already articulated by Foreign Ministry spokesperson on February 2, is a sobering reminder of the futility of trade wars.
"The U.S. imposed a 10 percent tariff on Chinese exports to the U.S. using the fentanyl issue as an excuse. China is strongly dissatisfied with this and firmly opposes it. We will take necessary countermeasures to firmly safeguard our legitimate rights and interests," Foreign Ministry spokesperson stated.
China's assertion that tariff wars produce no winners is rooted in economic interdependence, a defining feature of the modern global economy. The U.S. and China, despite their ongoing trade disputes, remain each other's critical trading partners. Disrupting this balance with tariffs will have ripple effects on global trade, leaving businesses, consumers and governments scrambling to adapt.
For American manufacturers reliant on Chinese components, a 10 percent tariff translates to higher production costs. These costs are likely to be passed on to consumers, eroding purchasing power and fueling inflation, potentially jeopardizing their access to one of the world's largest consumer markets.
While Trump touts tariffs as a means of addressing trade imbalances and protecting American jobs, the broader consequences reveal a different story. Far from bolstering the economy, protectionist policies have stifled innovation, disrupted global supply chains, and increased costs for American businesses and consumers alike.
China, on the other hand, has consistently positioned itself as a proponent of free trade and multilateralism, leveraging multilateral institutions to address global challenges. For example, it is an active participant in World Trade Organization affairs and has spearheaded initiatives such as the Regional Comprehensive Economic Partnership, the world's largest free trade agreement, which came into effect in January 2022.
The risks of Trump's tariff threats extend beyond China-U.S. relations. Canada and Mexico, America's top trading partners, have already signaled their readiness to retaliate. Canadian Prime Minister Justin Trudeau has warned of counter-tariffs "worth billions of dollars," while Mexico has emphasized its commitment to safeguarding its national interests. Similarly, the European Union, which Trump accused of treating the U.S. "very, very badly," is unlikely to stand idle in the face of protectionist measures.
Such retaliatory actions risk undermining global economic stability at a time when the world is grappling with pressing challenges. From climate change to post-pandemic recovery, the international community needs collaboration, not conflict. As the International Monetary Fund has repeatedly warned, escalating trade tensions could shave 0.8 percent off global GDP by 2025 – a loss equivalent to $700 billion annually.
The Chinese foreign ministry spokesperson's statement is an economic truth borne out by history. The Smoot-Hawley Tariff Act of 1930, which raised U.S. import duties to ostensibly protect American farmers and industries from foreign competition, actually exacerbated the Great Depression by triggering a wave of retaliatory tariffs and caused global trade to collapse.
More recently, the U.S.-China trade war too demonstrates the futility of such measures. Despite billions in tariffs, the U.S. trade deficit with China persists while American consumers bear the brunt of higher prices.
Rather than doubling down on tariffs, the U.S. should seek constructive solutions that address the underlying causes of trade imbalances. This includes investing in domestic industries, strengthening worker protection and enhancing competitiveness through innovation and education. Engaging with China in areas of mutual interest, such as climate change and global health, would also pave the way for a more cooperative relationship.
China's approach to trade disputes offers a valuable lesson. Collaboration yields better outcomes than confrontation. By emphasizing multilateralism and win-win solutions, China has positioned itself as a stabilizing force in an uncertain world. For the U.S., adopting a similar approach would not only mitigate economic risks but also strengthen its global reputation. Ultimately, the U.S. must prioritize dialogue and cooperation with China over unilateral actions and economic brinkmanship. The stakes are too high for both nations and the global economy.
The author is a special commentator for CGTN.