US policymakers should think more about retaliatory responses to probable tariff increases
The writer is a faculty member at Yale, formerly chair of Morgan Stanley Asia, and is the author of “Accidental Conflict: America, China, and the Clash of False Narratives” A tit-for-tat between China and the US on trade this month hints at what could well lie ahead if Donald Trump delivers on campaign promises to up the ante on Chinese tariffs when he returns to the White House.
That backfired. Over the subsequent years, the overall US merchandise trade deficit widened from $879bn 2018 to $1.06tn in 2023. Predictably, in response to tariffs, the Chinese share of the overall US trade deficit fell from 47 to 26 per cent over this same five-year period. However, the Chinese portion was simply diverted to Mexico, Vietnam, Canada, Korea, Taiwan, India, Ireland and Germany.
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