[Insight] Trump’s Tariff Comeback: A New Chapter in the U.S.-China Trade War

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During Donald Trump’s presidency in 2017, he initiated a large-scale trade war against China, primarily based on Section 301 of the Trade Act. The U.S. imposed high tariffs on Chinese imports to address the U.S.-China trade imbalance and intellectual property disputes.

This trade war heightened instability in global supply chains, forcing many multinational corporations to reallocate production resources. At the same time, it triggered retaliatory measures from China, escalating trade tensions between the two countries.

With Donald Trump winning the presidency again this year, his trade policy has once more taken center stage in global discussions. This article begins with a brief recap of Joe Biden’s trade policy, followed by an in-depth analysis of the potential impacts on U.S.-China relations under the incoming Trump administration.

Biden’s Continuation of Trump’s Trade Policies 

The Biden administration has emphasized a “tech war” driven by national security concerns, focusing on slowing down China’s advancements in cutting-edge technologies, particularly in areas such as artificial intelligence and supercomputing. This strategy reflects the U.S. effort to maintain its leadership in critical technologies.

In addition to targeting technology sectors, the Biden administration’s trade policy has largely continued the trajectory set during Trump’s first term. For example, in May of this year, the administration imposed high tariffs on strategic industries, including electric vehicles, solar energy, and lithium batteries. These measures align with a broader approach to protect U.S. economic and technological interests while mitigating China’s growing influence in global markets.

According to TrendForce, the weighted average tariff on Chinese imports rose to 19.3% following a series of trade sanctions implemented by the U.S.

Decline of China’s MFN Status 

The trade tension between the U.S. and China has escalated over the years. In the past, China benefited from the U.S. granting it Most Favored Nation (MFN) status, a core principle of international trade that requires trade benefits, such as tariff reductions, offered to one country to also apply to all other WTO members. In 2001, the U.S. granted China permanent normal trade relations (PNTR), allowing Chinese goods to enjoy the same preferential tariff treatment as goods from other countries while eliminating the need for annual reviews. This facilitated economic exchange between the U.S. and China. At that time, the average tariff on Chinese imports was about 3%.

However, the average tariff has now surged to 19.3%, signaling that MFN status has become ineffective in practice.

Trump’s 2024 Presidential Campaign and Post-Election Trade Announcements

During Donald Trump’s 2024 presidential campaign, his proposed trade policies heavily targeted China with even more aggressive measures. He announced his ultimate goal to revoke China’s Most Favored Nation (MFN) status entirely and raised the prospect of increasing tariffs on Chinese imports to over 60%.

After Trump’s election victory, he announced on November 26, 2024, that he would sign an executive order on his first day in office (January 20, 2025). The order would impose a 25% tariff on all imports from Mexico and Canada, along with an additional 10% tariff on all imports from China on top of existing tariffs. This move indicates that reigniting a tariff war is more than just campaign rhetoric.

Trump asserted that China has failed to adequately address the drug issue and emphasized that Mexico and Canada must take stronger measures against cross-border crime and drug-related challenges.

China responded by strongly opposing the proposed tariff increases, signaling the possibility of targeted retaliatory measures. Trump’s announcement has already sparked immediate concerns in the markets about a potential escalation in U.S.-China trade tensions.

Transshipment Concerns and U.S. Enforcement Measures

Trump also outlined plans to prevent China from circumventing U.S. tariffs by using third countries.

During Trump’s previous presidency, Chinese manufacturers often shipped their products to other countries for minimal processing before re-exporting them to the U.S. as a way to avoid high tariffs. This practice, known as transshipment, has drawn significant attention from the U.S. government in recent years, leading to stricter scrutiny of trade practices.

Countries in the ASEAN region—such as Malaysia, India, Vietnam, Cambodia, and Thailand—have become major hubs for transshipment. Additionally, Mexico, due to its geographical proximity and trade agreements with the U.S. (USMCA), has emerged as another key target.

Recent Measures to Address Transshipment

In response to transshipment practices, the U.S. government has strengthened trade enforcement efforts. For example, in July 2024, the U.S. and Mexico implemented stricter steel and aluminum import regulations. Under the new rules, products must be melted and poured within the U.S., Mexico, or Canada to qualify for duty-free treatment. Otherwise, these products face tariffs of up to 25% on steel and 10% on aluminum.

This policy is explicitly designed to target the circumvention of tariffs on Chinese goods via Mexico or Canada, further highlighting the U.S.’s growing focus on enforcing trade compliance.

 

Simultaneously, the U.S. has pressured the Mexican government to limit investment incentives for Chinese companies, such as reducing tax exemptions and restricting land availability, in an effort to curb China’s potential to further penetrate the U.S. market through Mexico.

These measures reflect the U.S.’s increasing focus on combating transshipment trade. After Trump assumes office again, it is expected that even stricter measures will be adopted to address these issues.

Explore Trump’s trade and energy policies in TrendForce’s latest report, uncovering their impact on U.S.-China relations, global supply chains, and key industries.

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