(Click on image to enlarge)

The lead image is from Chad P. Bown, Senior Fellow at PIIE.

Trump’s Social Media Threat

“If China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,” he wrote on Truth Social.

“Additionally, all talks with China concerning their requested meetings with us will be terminated!”

How We Got Here

• On “Liberation Day” Trump put an additional 34 Percent tariff on top of existing Biden and long-standing Trump tariffs.
• China retaliated with 34 percent tariffs.
• Today, Trump threatens an additional 50 percent tariff on China if China does not remove its retaliation.

Current and Proposed Setup

Megan Cassella: The average U.S. tariff on imports from China starting Saturday: 76%. That’s the 34% reciprocal tariff + 20% fentanyl tariff + Sec. 301 tariffs from the first term + baseline U.S. tariffs.

Not listed: The 25% tariff on buyers of Venezuelan oil, which a WH official tells me is not yet in effect. Official says TBD if that will stack on top, too. Also not clear to me when it will take effect, as the exec order said only that it would be “on or after” April 2.

Trump is vowing an additional 50% tariff on Chinese goods, effective Wednesday, if Beijing follows through with its announced retaliation.

That would bring the total tariff rate applied to Chinese goods to 104% so far this term, a White House official confirms to me.

At What Point Does it Cease to Matter?

That’s the question I asked Erica York, VP of federal tax policy for the Tax Foundation.

I have no answer yet. But as soon as we hit that point, additional threats by Trump are meaningless.

For example, there is no difference between 200 percent tariffs and 5000 percent tariffs because all trade with China will stop.

Revenue Zero

If trade ceases, income from tariffs that Trump claims will balance the budget will drop to zero.

And for his efforts, team Trump will not collect a cent but prices will jump. We call this winning.

What About Tariff Avoidance?

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US balance of trade, chart by Mish.

The US trade deficit with China decreased from 2018 to 2024 but it was at the expense of big increases elsewhere.

The improvement with China was mostly a mirage.

Balance of Trade 2018 vs Now

• Vietnam went from -39 billion to -123 billion
• Mexico went from -69 billion to -172 billion
• China improved from -418 billion to -295 billion (yeah right)

On January 18, 2025, I commented The US Trade Deficit with China is Understated by as Much as 30 Percent

Normal trade math does not add up. US imports and China exports are not in sync.

Brad Setser Comments

• Chinese exports started exceeding US imports only in those categories with tariffs, and only after the tariffs were imposed — which provides the basic answer.
• We know the US isn’t counting 1 billion small value (de minimis) packages in the trade data, and that alone is at least $60b in missing US imports that appear in the Chinese trade data. There are other sorts of tariff avoidance/ circumvention as well.
• So right now the Chinese export data is better guide to US China trade than the US import data — which is why I now emphasize the $500b or so China reports in exports to US rather than the $400b or so the US reports in imports

This appears to be an amusing case of China cleverly avoiding US tariffs but not clever enough to hide it better.

Tariff Avoidance

It was much easier to evade tariffs between 2018 and 2024 than it is now.

Rerouting trade through Vietnam now will result in a 46 percent tariff. Previously nothing.

There is scope for tariff avoidance through Mexico or Canada but masking that would be difficult. Also, Mexico and Canada may not cooperate so easily this time.

Point of No Return

We may already be past the point of no return (where nothing Trump further does to China is meaningless).

That is not true in reverse. China can easily play hardball with the US over rare earth minerals.

Understanding Rare Earths

At present China produces 60 percent of the world’s rare earths but processes nearly 90 percent, which means that it is importing rare earths from other countries and processing them. This has given China a near monopoly.

According to the United States Geological Survey, China has been supplying 54 percent of the germanium used by the United States, a material used in infrared technology and fiber optics.

The United States has not mined its own gallium, used in semiconductors, since 1987. Japan supplies 26 percent of American imports of gallium, China 21 percent and Germany 19 percent, along with several smaller suppliers.

Antimony (Sb), a critical metalloid, is a key element of the American war machine, essential for communication equipment, night vision goggles, explosives, ammunition, nuclear weapons, submarines, warships, optics, laser sighting and more, according to U.S. Army Major General (retired) James Marks.

China controls nearly 50% of the global antimony supply.

Related Posts

November 21, 2024: China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology

In a warning shot to the Trump administration, China tightens export controls on some dual-use minerals.

December 3, 2024: China Halts Rare Exports Used by US Technology Companies and the Military

This is China’s advance salvo at Trump tariffs. It comes one day after the Biden administration expanded curbs on the sale of advanced American technology to China.

China Retaliates Against Trump Tariffs

An April 4, 2025, I commented China Strikes Back With 34 Percent Tariffs, Stocks Plunge Second Day

China restricts 7 more rare earths, something I have warned about many times.

Whereas Trump may already be past the point China couldn’t care less what Trump does, the reverse is not true.

China can easily block rare earth exports to the world. If that happens, Trump will panic.

We should not be in this position, but we are.

Oh wait, I forgot. “Trade wars are good and easy to win.”

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