A sudden decoupling as China pushes back

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The crash US-China decoupling | China’s response and Trump’s negotiating aspirations | The WTO sounds the alarm | More new tariffs? | Whither US manufacturing? | Trade war tracking tools

The crash US-China decoupling

Bloomberg describes how Trump’s shocking policies are pushing US-China trade toward a cliff’s edge. The CSIS Trade Guys describe the dangers of abrupt US-China decoupling. The New York Times demonstrates the difficulty of calculating tariffs on Chinese imports in the wake of extreme change. Deborah Elms of the Hinrich Foundation lays out how the world should move forward in response to Trump’s tariff policy.

Mentioned publications

1. Trump Shock Pushes US and China Toward Decoupling Cliff Edge – Enda Curran, James Mayger, and Shawn Donnan, Bloomberg, April 9, 2025
   Trump’s steep tariffs on Chinese goods and China’s forceful retaliation have accelerated an unintended march toward a full-scale economic decoupling despite earlier US reassurances. The clash has rattled global markets, fueled recession fears, and exposed America’s deep reliance on Chinese imports. Meanwhile, Beijing is using "precision-guided economic munitions", including export controls on critical minerals and blacklisting US firms, to inflict targeted damage while avoiding broad economic self-harm.
2. Emergency Trade Guys: Tariff Whiplash and Chinese Decoupling – The Trade Guys (Podcast), Center for Strategic and International Studies, April 10, 2025
   Experts discuss the implications of President Trump's 90-day pause on planned reciprocal tariffs, highlighting the resulting market volatility and the escalating trade tensions with China. They express concerns over the unpredictability of US trade policy, the potential for a full economic decoupling between the US and China, and the broader impacts on global supply chains and economic stability.
3. How Much Are Tariffs on Chinese Goods? It’s Trickier Than You Think – The New York Times, April 12, 2025
   The US has imposed a complex and overlapping set of tariffs on Chinese imports, with some products now facing cumulative rates exceeding 200%, while others like smartphones and ‘informational materials’ such as children’s books remain exempt. This patchwork of duties creates major uncertainty for US businesses, challenging supply chain decisions and making cost planning more difficult.
4. How we should move forward in Trump’s turbulent trade world – Deborah Elms, Hinrich Foundation, April 15, 2025
   With his announcement of sweeping worldwide reciprocal tariffs, Donald Trump shredded America’s commitment to the multilateral trading system. In its wake, governments that depend on open economic engagement and cooperation as a critical means to deliver growth need to act. A first step could be a coordinated statement from the CPTPP and EU, which can be followed by dialogues in other venues.

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China’s response and Trump’s negotiating aspirations

Massachusetts Institute of Technology’s economist Yasheng Huang lays out China’s plan to fight, while the New York Times details China’s chokehold on critical minerals refining as it suspends exports to the US.  Politico reports on Trump’s strategy for making a deal with China.

Mentioned publications

1. China’s Plan to Fight Trump’s Trade War – Isaac Chotiner, The New Yorker, April 17, 2025
   Despite escalating US tariffs, China is unlikely to make significant concessions due to distrust of US policy consistency and the political cost of appearing weak. Instead, China is doubling down on tech independence in strategic sectors while avoiding deeper domestic reforms that would weaken state control. Beijing is calling Trump’s bluff, betting that rising economic costs and political pressures in the US will force Washington to back down before China has to fundamentally change course.
2. China Halts Critical Exports as Trade War Intensifies – Keith Bradsher, The New York Times, April 13, 2025
   China has halted exports of key rare earth metals and magnets, key components for electric vehicles, semiconductors, and defense systems, in retaliation for US tariffs. The suspension, enforced through a new export license regime that has yet to be implemented, is already disrupting global supply chains and raising fears of production delays. With 99% of heavy rare earth refining and 90% of magnet production concentrated in China, the move underscores China's leverage and raises the risk of prolonged shortages for critical components.
3. Trump wants to make a deal with China. Here’s how he’s trying to make that happen – Politico, April 16, 2025
   Donald Trump is ramping up pressure on China through high tariffs and trade deals with its neighbors, aiming to isolate Beijing and force it to the negotiating table. However, China is retaliating with its own tariffs and strengthening regional ties, while doubts grow over the effectiveness of Trump’s strategy amid mixed signals, domestic backlash, and questions about his willingness to escalate.

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The WTO sounds the alarm

WTO Director General Ngozi warns against the US and China trade break up, while the WTO forecasts a steep decline in North American exports due to Trump’s trade policies.

Mentioned publications

1. Statement by the Director-General on escalating trade tensions – World Trade Organization, April 9, 2025
   The WTO warns that escalating US-China trade tensions could cut bilateral trade by up to 80% and the conflict could spill over to other countries, potentially reducing global gross domestic product by 7%. Rising tensions risk splitting the global economy into rival blocs, undermining long-term growth. The WTO urges members to pursue dialogue and cooperation to preserve the rules-based trading system.
2. Temporary tariff pause mitigates trade contraction, but strong downside risks persist – WTO Trade Forecasts, April 16, 2025
   The WTO projects global merchandise trade will fall by 0.2% in 2025, with risks of a deeper 1.5% decline if tariff tensions worsen, particularly between the US and China. While a temporary pause in reciprocal tariffs offers some relief, persistent uncertainty continues to weigh on both goods and services trade, especially impacting North America and the least-developed economies.

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More new tariffs?

The New York Times reports on a newly announced section 232 investigation targeting semiconductors and pharmaceuticals. The FT says that Trump will investigate the critical mineral supply chain – and tariffs may follow. CNBC covers the outcome of the US investigation of Chinese shipbuilding and new fees on Chinese ships. Henry Storey, for the Hinrich Foundation, spells out the critical flaw in Trump’s critical minerals strategy.

Mentioned publications

1. Trump Moves to Put New Tariffs on Computer Chips and Drugs – Ana Swanson and Tony Romm, The New York Times, April 14, 2025
   Trump has launched national security investigations that could lead to new tariffs on imported semiconductors, pharmaceuticals, and related equipment to encourage domestic production. Citing the need to reduce reliance on foreign supply chains, particularly from Asia, the Trump administration is pursuing Section 232 tariffs as part of a broader reshoring strategy. Critics warn the move could raise costs and face industry pushback without complementary incentives and international coordination.
2. HF sponsored accessDonald Trump threatens to hit critical minerals with tariffs – Aime Williams and Demetri Sevastopulo, Financial Times, April 16, 2025
   Donald Trump has launched a national security investigation also into critical minerals imports, signaling potential new tariffs aimed at reducing US reliance on foreign suppliers, especially Chinese. The resulting tariffs may replace existing "reciprocal" rates and could be lowered or raised depending on the investigation’s findings. The move escalates trade tensions following China’s suspension of rare earth exports and highlights growing competition over materials essential for defense, energy, and technology sectors.
3. Trump administration announces fees on Chinese ships docking at U.S. ports – Lori Ann LaRocco, CNBC, April 18, 2025
   The Trump administration announced port fees on Chinese-built vessels starting October 2025, aiming to reduce US reliance on Chinese shipbuilding and boost domestic production. The proposed levies, up to US$1.5 million per vessel, are a part of a broader effort to revive US ship manufacturing back, a policy which has bipartisan support. China has criticized the move and warned of potential retaliation.
4. Can Trump break China’s critical minerals stranglehold? – Henry Storey, Hinrich Foundations, April 15, 2025
   Donald Trump has issued a flurry of executive orders recently aiming to regain control of critical minerals. Yet, domestically, the US is struggling to reduce the byzantine US permitting process for mining. Internationally, Trump is trying to negotiate minerals deals with war-torn Ukraine and corrupt gangs in Congo and threatening to annex neighboring countries. To truly break China’s grip on the sector, Washington must work with allies.

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Whither US manufacturing?

The Wall Street Journal looks at the impact of Trump’s chaotic automobile tariffs on automakers. Bloomberg’s Odd Lots provides a reality check from an actual manufacturer about helpful and harmful US policies. CNBC considers the prospect of manufacturing iPhones in the US.

Mentioned publications

1. Trump Gave Automakers a Tariff Break. It’s Causing More Confusion – Ryan Felton, The Wall Street Journal, April 15, 2025
   The Trump administration imposed a 25% tariff on all vehicle imports but offered a deduction based on the share of "US content" in each vehicle, a term that remains vaguely defined. Automakers are confused about how to claim the deduction due to lack of clear guidelines on what qualifies as US-produced parts or how to calculate compliance. The confusion has stalled billions in potential savings, as suppliers and manufacturers scramble to trace component origins across complex global supply chains.
2. What an American Stove Maker Wants You to Know About US Manufacturing – Odd Lots (Podcast), Bloomberg, April 7, 2025
   Odd Lots’ latest episode provides a reality check on US policies from an actual manufacturer, highlighting the impact of trade barriers. The discussion explores the challenges of US hardware manufacturing, including supply chain complexities, tariffs, and the pursuit of venture capital. It also touches on the cultural perceptions of electric stoves and their potential role in promoting home electrification and energy resilience.
3. Here’s how much a 'Made in the USA' iPhone would cost – Kif Leswing, CNBC, April 14, 2025
   Building an iPhone entirely in the US would be logistically challenging and significantly more expensive. It would cost 25% more than it does now. Labor shortages, infrastructure gaps, and tariffs on foreign components further complicate the feasibility, despite political pressure to reshore production. Instead, Apple may opt for limited US assembly on select products to maintain goodwill and secure tariff exemptions.

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Trade war tracking tools

USTR compiles a list of Presidential tariff actions. Chad Bown for the Peterson Institute for International Economics updates his excellent guide to the trade war. Joseph Politano in his Apricitas Economics blog charts the largest tariff hike in modern history.  Yale’s Budget Lab attempts to quantify the fiscal and economic effects of the tariffs.

Mentioned publications

1. Presidential Tariff Actions – Office of the United States Trade Representative (USTR)
   The USTR’s Presidential Tariff Actions page outlines a series of executive orders and policy measures aimed at addressing US’s national security concerns, trade imbalances, and foreign trade practices.
2. Trump's trade war timeline 2.0: An up-to-date guide – Chad P. Bown, Peterson Institute for International Economics (PIIE), updated April 17, 2025
   PIIE’s Trump's Trade War Timeline 2.0 tracks major trade actions during Trump’s second term, including tariffs on imports from China, Canada, Mexico, and others.
3. Charting the Largest Tariff Hike in Modern History – Joseph Politano, Apricitas Economics, April 13, 2025
   Trump’s sweeping tariffs on April 2 represent the largest single-day tariff hike in modern US history. These measures have disrupted the global economy, raised consumer and business costs, and created significant trade policy uncertainty. The abrupt rollout and partial reversals have further rattled markets and strained international relations.
4. The Fiscal and Economic Effects of the Revised April 9 Tariffs – The Budget Lab, April 10, 2025
   Yale’s Budget Lab estimates that Trump’s tariffs announced this month would significantly raise costs for US consumers, increasing average household expenses by US$4,700 annually and disproportionately affecting lower-income families. The tariffs are projected to reduce GDP by 1.1 percentage points in 2025, eliminate 740,000 jobs, and sharply raise prices on goods like apparel, while delivering only modest net fiscal gains after accounting for economic fallout.

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