Globalization once significantly enhanced supply chain efficiency, but this trend has begun to shift in 2018 when the Trump administration initiated a trade war with China, a policy direction largely extended under the Biden administration, with further pressure on strategic technologies and industries. Various developments unfolded amid these tensions: 1) The “Make in India" initiative that attracted Apple to India. 2) Expanded investments by major Taiwanese businesses in Southeast Asia, and 3) expansions into overseas markets of Chinese automakers like BYD. These seemingly independent developments all reflect a broader trend towards supply chain diversification. With Trump 2.0 becoming a reality, how might the U.S., China, and Asia-Pacific economies adapt and potentially benefit from the potentially shifting supply chain landscape?
I. Recap of the U.S.-China Trade War & Its Impact Since 2018
With the return of Trump 2.0, the uncertainty of escalating U.S.-China trade tensions looms over the world once again. To better understand the potential implications, let’s first revisit the onset of the trade war in 2018 and its direct impacts:
I. Comprehensive Tariffs under Trump, Further Expanded by Biden
During his first term, Trump imposed tariff increases on Chinese goods under Sections 201, 232, and 301, with Section 301 involving the most extensive measures in terms of value, industry coverage, and tariff rates. Since the start of the Section 301 investigation in 2017, four rounds of tariff hikes were rolled out between 2017 and 2019, involving over $500 billion worth of Chinese goods. During this period, average tariffs on Chinese imports surged from under 5% to nearly 20%, affecting products such as steel, textiles, machinery, vehicles, home appliances, solar products, and consumer electronics.
Here's a quick overview of the tariff hikes:
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List 1: 25% additional tariff on $34 billion of Chinese imports, effective July 6, 2018.
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List 2: 25% additional tariff on $16 billion of Chinese imports, effective August 23, 2018.
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List 3: 10% additional tariff on $200 billion of Chinese imports, effective from September 24, 2018, increased to 25% in May 2019.
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List 4 (List 4A and 4B): divided into two lists that cover $300 billion of Chinese imports combined. List 4A levied an additional 15% tariff on $120 billion of goods, effective from September 1, 2019, later reduced to 7.5% in February 2020. Originally set to take effect on December 15, 2019, List 4B tariffs, which targeted consumer electronics like smartphones and laptops, were ultimately suspended following the Phase One trade deal.
Under the Biden administration that took office in 2021, tariff policies introduced during the Trump era have largely remained in place. Furthermore, in May 2024, Biden announced tariff increases on an additional $18 billion of Chinese goods, targeting strategic sectors such as electric vehicles, lithium batteries, solar products, critical minerals, and legacy semiconductors. Concurrently, the Biden administration escalated the tech war by implementing a sweeping ban on exports of advanced chips, chipmaking equipment, and related raw materials to China.
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