Trump tariff plan to spur US inflation

US President Donald Trump said on Sunday that he will announce 25 percent tariffs on all steel and aluminum imports into the country on Monday, which analysts said will make it even harder for the White House to tame persistent inflation.

The ongoing trade war initiated by the United States shows no signs of abating and could escalate further, analysts said, adding that it will not help Washington achieve its goal of reshoring manufacturing and could backfire.

"Fighting inflation was one of Trump's campaign promises, but tariffs will only make inflation worse," said Yao Yang, director of the China Center for Economic Research at Peking University.

"High inflation under the Biden administration was one of the key factors that sent Trump back to the White House. Trump may not care about how the Democrats are angry about his policies; but he needs to care about the reaction of his political base," Yao added.

"These tariffs will translate into higher input costs for a wide range of industries that rely on steel and aluminum, such as automobile manufacturing and construction, and those additional expenses will likely be passed on to consumers," said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation.

Moreover, these sweeping tariffs, Zhou noted, are likely to disrupt supply chains and undermine the competitiveness of US industries, and will further complicate the administration's ambitions to revitalize domestic manufacturing.

"If the Trump administration is serious about bringing manufacturing jobs back to the US and reducing its trade deficit, its most sensible policy is to allow Chinese companies to invest in the country," Yao said.

"China's industrial structure is complementary to the United States' — the US is strong in high-tech industries, and China is strong in medium-range industries," Yao said, adding that "President Donald Trump is good at cutting deals; he will soon realize that welcoming Chinese investment is a much better deal than imposing tariffs on Chinese exports."

Trump did not think through the whole issue and announced the tariffs in a spontaneous manner. His quick U-turn on Canada and Mexico, a 30-day pause on tariff threats against these two countries, is one example. Another example is his turn on the de minimis for Chinese exports, Yao said.

Trump signed an executive order on Friday that put a pause on imposing tariffs on small-value packages arriving from China, until the US Department of Commerce can ensure that "adequate systems are in place to fully and expediently process and collect tariff revenue".

Trump, on Feb 1, suspended the de minimis trade exemption, a provision commonly used by Chinese e-commerce companies Temu and Shein to send goods worth less than $800 into the US duty-free, as part of his administration's new tariff policies that include an additional 10 percent tax on all Chinese goods.

China swiftly responded with a 15 percent levy on US coal and LNG and 10 percent for crude oil, farm equipment and a small number of trucks as well as big-engine sedans, effective on Monday.

In contrast to the broader and harsher measures taken during the first Trump administration, China's latest round of tariff hikes targets a smaller range of US products and at lower rates, notably sparing the imposition of additional duties on major agricultural exports like soybeans and corn, said Cui Fan, a professor of international trade at the University of International Business and Economics.

China is the world's largest soybean consumer, with imports from the US accounting for around 21 percent of its total soybean supply, data from the General Administration of Customs showed.