'China To Gain Most From Trade Wars'

'If you compare the data from 2017 and 2023 of the US imports from the world and China, you will see that the US was a complete loser in the trade war, and China was a complete gainer.'

Trump's second term started with another trade war, precisely on February 1, 2025

A trade war involving the US and Canada began with Donald Trump signing orders imposing 25% tariffs on all imports from Canada except oil and energy, which would be taxed at 10%.

Then Canadian prime minister Justin Trudeau hit back with 25% tariffs on C$30 billion ($20.7 billion) worth of US imports including orange juice, peanut butter, wine, spirits, beer, coffee, appliances and motorcycles.

Trudeau said Canada would impose tariffs on another C$125 billion of US goods like motor vehicles, steel, aircraft, beef and pork.

Then the Trump administration imposed 20% tariffs on China, and in retaliation, the Chinese government imposed 15% tariffs on the United States.

What are the implications of this trade war on the global economy? Where will this lead to?

"The new trade war is directed at all countries with which the US has trade deficit which means virtually all the countries in the world," Ajay Srivastava, Founder, Global Trade Research Initiative tells tells Rediff.com's Shobha Warrier in the first of a two-part interview.

"The US is going to lose this trade war also very badly, and it will be worse than the first trade war."

As the trade war between the US and China, Mexico, Canada and EU intensifies, who will be affected most?

If you look at what has happened so far, we see that America has taken actions like imposing 25% tariff on steel and aluminium on all countries. So, steel and aluminium trade will be affected.

Next, they have imposed country specific tariffs on two countries -- Canada and China.

But they have postponed the tariffs on Mexico by one month again.

On the other hand, on countries like India, no specific tariffs have been announced so far. So, we only be paying for 25% tariffs on steel and aluminium like every other country.

This is the tariff imposed by the Trump 2 regime.

On China, they are continuing with the tariffs imposed by Trump 1 on many other products but that is only for China, and it is not there for any other country.

This is the summary of the trade actions which are in force right now.

With a flat 25% tariff on steel and aluminium which are essential for manufacturing, how will it affect the global manufacturing itself?

Let me talk about India first. Steel has two parts; core steel and then products made out of steel like pipes, tubes, etc.

We import more core steel from America than we export to them. So, if India goes for counter tariffs, it will hit American steel also hard.

Similarly, we import more aluminium from America than we export to them. Here also, if we decide on retaliatory tariffs, it will hit them harder.

Of course, we export steel products to them, and they don't export steel products to us much as it requires lot of labour.

So, India will be hurt by US tariffs because the US is not a big market for Indian steel and exports to the US have been declining over the years.

For example, there were tariffs from 2018-2023. Then there was an agreement between Prime Minister Modi and US President Biden and tariffs were dropped from 2023-2025. So, from 2023 to early 2025, there was no tariff. Now again, Trump has imposed tariffs.

Because of the high prevalence of tariffs in the last 5 years, our exports to the US are already down. So, the steel sector will face hardships.

The other day, Vice President of the European Commission Kaja Kallis said that China would be laughing at the US trade wars as it would be the most to gain.
Do you feel that way?

Yes, China is going to gain the most due to the trade wars. I will give you the data to prove my point.

The trade war with China started in March 2018 when the US imposed 25% tariffs on steel and 10% tariffs on aluminium on the entire world, and tariffs on hundreds of other products from China. The Biden administration also continued with this.

At that time, their focus was on China.

If you compare the data from 2017 and 2023 of the US imports from the world and China, you will see that the US was a complete loser in the trade war, and China was a complete gainer.

China benefitted the most because of the trade war.

During this 5-year period, global imports of the US increased by $760 billion. If your global imports are increasing, you are not being benefitted by imposing tariffs on China as you are importing more and more.

Before the trade war, imports from China were coming to the US by paying tariffs. Now, most of these imports came without paying tariffs via the countries with which the US has FTAs (Free Trade Agreement). For example, they came from countries like Mexico and Vietnam.

In short, pre-trade war, goods reached the US by paying duty.

Post-trade war, the Chinese goods went to the US indirectly through Mexico and Vietnam.

From 2018-2023, the US global imports increased by $760 billion.

And China's global exports increased by $1 trillion.

So, who gained and who lost in the trade war?

China was the clear winner, and the US was the clear loser.

The first trade war was focussed primarily at China and the winner was China.

Now, the new trade war is directed at all countries with which the US has trade deficit which means virtually all the countries in the world.

I will say, the US is going to lose this trade war also very badly, and it will be worse than the first trade war.

It is also losing more friends this time, not just China.

The US thinks by increasing tariffs, it can improve manufacturing. No. For improving manufacturing, you have to be competitive which means you should have low cost of production.

If your wages are very high, you cannot make most of the industrial goods as they are labour intensive. For example, textiles, shoes, low end engineering goods, organic and inorganic chemicals.

The US is good only in agricultural products and very high-end products like Boeing, semi-conductor products, etc. But they contribute only 15% of the global trade.

Most of the global trade is in industrial products in which the US does not have much competitiveness.

And by merely increasing tariffs, the US manufacturing will not get revived.

The only thing that will happen is, consumers will pay high tariffs.

So, the consumers will be the sufferers....

Yes. I will give you an example. The cost of an iPhone is $100. If you charge 20% tariffs on it, the consumers will pay $120. Not the exporter.

It means the tariffs are basically to be paid by the consumers.

So, who is suffering in the tariff war? The consumers.

Mr. Trump wrongly says that he will be collecting a lot of money from foreign countries.

No Sir. The tariffs are paid by the importers, your people and not the exporters.

Trump has got it all wrong.

IMAGE: Ajay Srivastava

Reports say that over 5 million US jobs are in danger due to the trade war. Inflation has already hit the US. And consumers are worried.
Is this going to continue with more vigour?

Yes, tariffs are operational for barely one or one-and-a-half months. Still, inflation is at an all-time high at 5.1%.

Have you heard of a developed country like the US having such high inflation?

This kind of high inflation is a developing country phenomenon. Now, their inflation levels are at our levels.

So, they are losing credibility very fast as the interest rates are very high, inflation is very high, and they are going to lose more than 2 million jobs in the next 2 years.

Many automotive companies have started laying off. Tesla shares are at all-time low.

Reports say every US household will pay $1,200 more in terms of taxes.

Not to say about prices. Prices of all items including that of medicines will increase.

So, this cannot go along for long. And people of the US are watching and suffering.

Trump is making enemies everywhere, domestically and internationally. He must have lost most of his friends already. Look at the EU, China..

India says the US is our friend, but soon we will realise that they are not acting as our friend, they are insulting us in public.

So, Trump is fast losing his friends externally and internally, other problems have already started.

Feature Presentation: Aslam Hunani/Rediff.com