Former President of the Chinese Academy of International Trade and Economic Cooperation: "Reciprocal tariffs" exceeded expectations, and normal trade

The "reciprocal tariff" war launched by Trump continues to escalate.

US officials announced that additional tariffs on Chinese products will be imposed starting at 12:00 a.m. on April 9th, reaching a tariff rate of 104%. Two days ago, Trump said that if China does not cancel retaliatory tariffs, the US will impose an additional 50% tariff on Chinese products.

In response, the Chinese Ministry of Foreign Affairs quickly replied, "The Chinese people do not cause trouble, nor are they afraid of it. Pressure, threats, and blackmail are not the right ways to deal with China. China will surely take necessary measures to firmly safeguard its legitimate rights and interests."

After Trump announced on April 2nd that tariffs would be imposed on almost all countries and regions around the world, it not only caused panic and significant turmoil in the global capital market but also seriously disrupted the normal operations of import and export enterprises in various countries. In the United States, Trump's tough policies have also sparked widespread dissatisfaction. According to a report from the US magazine Fortune cited by Huanqiu.com, the US Chamber of Commerce is considering suing the Trump administration to stop the new tariffs that will take effect on the 9th.

How long might this round of tariff war last? How will the international trade situation develop? Facing this "chaotic situation," do overseas - going enterprises that are deeply affected have good countermeasures? In order to gain an in - depth understanding of Trump's current tariff policy and its impact on China's foreign trade industry, 'Qiantang Going Global' had an exclusive dialogue with Huo Jianguo, the former director of the Research Institute of the Ministry of Commerce and a senior foreign trade expert.

Huo Jianguo has long been engaged in foreign economic and trade management and policy research. He has rich practical work experience and a high level of policy theory. He is an expert enjoying special government allowances from the State Council, a senior consultant to the 'Belt and Road' Urban Economic and Trade Cooperation Forum, and a Doctor of Economics from the Institute of International Economics and Trade at Nankai University.

From 1993 to 2001, Huo Jianguo participated in China's WTO accession negotiations and APEC work on multiple occasions. After China's accession to the WTO, he was responsible for leading the research on countermeasures for 14 industrial sectors under the jurisdiction of the State Economic and Trade Commission, and achieved positive results. Over the years, he has published many articles in major domestic economic journals and has written books such as 'China's Foreign Trade and National Competitiveness'. He is proficient in the fields of world economy, international trade, foreign economic and trade management, and policy research.

Huo Jianguo believes that the 'reciprocal tariff' policy will last at least 3 - 5 months. Affected by this, it is basically a foregone conclusion that the global trade growth rate will slow down this year. Whether Trump will change his mind next mainly depends on the performance of the US economy in the next six months.

He suggests that countries around the world should no longer tolerate Trump's bullying policies and repeat the mistakes of the economic crisis in the 1930s. Instead, they should unite and firmly resist. Only in this way can they truly safeguard their own national interests.

The following is the dialogue between 'Qiantang Going Global' and Huo Jianguo:

The US cannot wage war with all its trading partners simultaneously

Qiantang Going Global: In February this year, when you gave a speech at the International Service Center for Chinese Enterprises, you predicted that the US would soon raise tariffs to around 40%. How do you view the 'reciprocal tariff' policy announced by Trump in the past week?

Huo Jianguo: The current situation of global trade conflicts is extremely severe. A 54% tariff on China exceeds everyone's expectations, which means that normal trade is actually impossible to conduct. Therefore, our countermeasures are necessary.

Trump has gone to extreme lengths. If the world can unite and jointly counter his unilateralism and bullying, the US will have to back down because it cannot wage war with all its trading partners at the same time. However, if everyone fails to unite, it will only encourage Trump's madness, which will damage the global economy, international trade, and international rules. Eventually, the US economy will also suffer significant losses, such as rising inflation, deteriorating economic indicators, and even a possible recession. So, this is a very sensitive and crucial period.

The situation of mutual sanctions may last for another 3 - 5 months

Qiantang Going Global: What do you think is Trump's real purpose in doing this?

Huo Jianguo: Maybe he wants to force us to negotiate. If there is an opportunity for negotiation, we should seize this window period. After all, a trade war will only hurt both sides, and finding a solution acceptable to both sides through negotiation is the most ideal choice and a way to safeguard national interests.

In the short term, the US economy may still withstand the pressure of high tariffs, but problems will emerge over time. The risks of inflation and economic recession are clear to Trump himself. Currently, the US consumption index is declining, and the stock market is fluctuating. If inflation rebounds, the contradictions in his economic policies will become more obvious. Some senators have even proposed to take back the president's decision - making power on tariffs.

Moreover, Trump also wants to show his "achievements" as the president by imposing taxes externally and cutting taxes domestically, making the US seem more powerful. However, the practice of "America First" is essentially a form of bullying, putting US interests above those of other countries and making others "pay tribute" to it. This is definitely unacceptable to the world.

However, given Trump's personality of "not admitting defeat until faced with disaster," he will not easily change his decision without huge domestic pressure. I speculate that the current situation of mutual sanctions may last for 3 to 5 months, after which everyone will return to the negotiation table. In short, we need to counter while also leaving room for negotiation to strive for a win - win result.

Qiantang Going Global: Is it possible for the conflict to escalate within these 3 - 5 months?

Huo Jianguo: It is possible if China and Europe respond strongly. Conflicts start with anger and mutual sanctions, and if they cannot be resolved, they may even escalate to military means. In the 1920s, US President Hoover imposed tariffs, which led to a major recession in the US economy. Some people also attribute part of the outbreak of World War II to this. But I think the biggest lesson from World War II is that European and American countries indulged Hitler's greed. By the time the US and Europe realized the problem and organized forces to fight back, it was already too late.

The world today faces the same problem - can we recognize the disasters that Trump's actions bring to the world, unite as soon as possible, and have more countries stand up to counter instead of humbly "paying tribute." Therefore, China's direct counterattack is completely correct. It not only safeguards the dignity of the Chinese people but also protects the interests of the global economic and trade.

Qiantang Going Global: To what extent will the tariff war make Trump unable to bear it? What economic indicators can be used as a basis for judgment?

Huo Jianguo: Currently, the stock market fluctuations are a short - term factor affected by panic. The most important basis for judgment is the change in the US consumption index, including retail prices and total social retail sales. Because in addition to the capital market, consumption supports the development of the US economy. The Federal Reserve pays more attention to inflation and employment, but these will not show up in the short term. A decline in consumption will directly lead to a slowdown in economic growth or even negative growth.

The reason why the current tariff - increasing policy may last for 3 - 5 months is that if the policy does not produce positive effects before October this year and instead leads to a slowdown in economic growth, it will directly affect Trump's prospects in next year's mid - term elections. So, he can hold on for at most half a year. However, if the effects are good and the US economy remains prosperous, Trump will become more determined.

The short - term purpose of tax increases is more to increase fiscal revenue and make up for the gap caused by tax cuts for domestic enterprises

Qiantang Going Global: Some people think that the purpose of imposing tariffs is to relieve the pressure of US debt. What's your view?

Huo Jianguo: US debt is a more serious problem and can be said to be the biggest contradiction in the US economy. If he wants to resolve the US debt through trade balance, the gap is too large. The short - term purpose of tax increases is more to increase fiscal revenue and make up for the gap caused by tax cuts for domestic enterprises. The US side expects that after the implementation of reciprocal tariffs, customs revenues will increase from more than 100 billion to more than 500 billion, but it still cannot fill the big hole dug by tax cuts. It is completely "robbing Peter to pay Paul," and the bullying tariff policy is not accepted by the world, and the US itself cannot sustain it.

Qiantang Going Global: Do you think there are so - called indirect beneficiaries in this round of trade conflicts?

Huo Jianguo: From a global perspective, I don't think there are any beneficiaries. Under the threat of tariffs, enterprises have poor expectations and have at least made necessary adjustments. Adjusting the global market layout takes at least one year, which will definitely lead to negative growth in global trade.

The global economy entered a weak recovery phase this year. The WTO previously predicted that global trade might recover to a 3% growth rate this year. However, judging from the current situation, the price increases caused by the trade war lead to inflation. To solve the inflation problem, macro - level tightening will inevitably lead to an economic slowdown. It is still difficult to determine exactly how much the global economic growth rate will decline this year, but we estimate that it is very likely to drop to around 2.3%. If emerging countries in Southeast Asia are severely hit, the drag will be even greater.

The tariff policy seems to "reap the world," but in fact, it is a containment of China

Qiantang Going Global: Some countries have been imposed with higher tariff rates than China. Previously, some enterprises transferred their supply chains to these countries to avoid the trade war, but they still cannot escape this time.

Huo Jianguo: Indeed, this tariff policy seems to "reap the world," but actually has hidden motives. Ultimately, it is still aimed at containing China.

Previously, China had already been imposed with a 20% basic tariff, and adding this 34% makes it very high. Looking at the countries with tariff rates exceeding 40%, many of them are key regions for Chinese enterprises' investment and export transfer, indicating that the US has blocked the "loophole" of China's re - exports through third countries. Even if enterprises invest overseas, they cannot bypass it.

Therefore, enterprises investing overseas need to change their thinking. They cannot invest overseas just to avoid the risk of US tariffs, as they will still encounter new troubles. Instead, they should truly serve the local market, do a good job in localization, relieve export pressure, avoid intensifying Sino - US contradictions, and achieve market diversification to find new growth points.

Qiantang Going Global: Then how should enterprises that have already built factories in Southeast Asia respond now?

Huo Jianguo: If China and Europe can reach some kind of tacit understanding, such as reducing tariffs and promoting trade, it will be a great opportunity for enterprises. There are also many potential markets in Latin America, Africa, and the Middle East to explore. Therefore, enterprises need to take immediate action, actively explore new markets, and optimize their supply chains to minimize the tariff pressure.

At the same time, the country should also support enterprises in exploring markets and provide necessary support. On the one hand, it should open up domestic sales channels and increase efforts to encourage consumption. On the other hand, it is also recommended to allocate a portion of government bonds or issue additional bonds to support foreign trade enterprises through difficult times.

This article is from the WeChat public account "Hangzhou Qiantang Enterprise Going Global Service Base". Author: Qiantang Going Global. It is published with authorization from Qiantang.