China imposes 84% tariffs on US Goods as Retaliatory Measure to US 104% tariffs on Chinese Goods

China set the import customs duty for US products to 84%. Note that the additional import VAT is 13%, bringing the total tariff costs for imports from the US to 97%. There may be some variations for certain products.

The US trade balance with China is heavily in the negative. This trade balance is unsustainable and needs to improve.

Why?

The negative trade balance of the US shows that China send more products to the US than US to China. The US consumes more than China does. The living standards are different as well as cost levels and industrialization. But also the levels of savings, where the US has a saving rate of 7% and China of ca 30%. The US consumes too much and saves too little.

Chinese cheap products are attractive and US expensive products are less attractive. In addition, China used to impose various tariffs on US products, making the US products even less attractive and more expensive. China regulated the home demand with tariffs on foreign goods, regulations and subsidies for home products.

Since Donald Trump’s election (and even before under Biden), the US is imposing tariffs on imports, lately 104%, of Chinese products.

Evidently, there will be a shift of US local demand to US products, but also an increase in prices, i.e. a tariff generated inflation. As well, there may be a reduction in overall consumption as the purchasing power is reduced. The consumption will be less debt financed and the people may feel more secure but poorer because they are forced to reduce consumption.

The positive effect will be shown in the trade balance and in the balance of payments. The US will reach lower debt levels as well because the US will start to earn more than they consume. This concerns private and state consumption.

From this point of view, Donald Trump acts mindfully. Tariffs are measures to reduce consumption, indebtness and will increase demand for local products with savings and investments increasing locally. Debt levels will fall and paid off with tariff income allowing eventually to reduce taxes.