How Trump’s Proposed Tariff on Chinese Imports Would Impact Your Wallet If He Wins
Now that Donald Trump is officially the Republican candidate for president in 2024, it’s a good time for investors to consider what market-moving policies he may implement if he wins a second term. While it can be hard to know exactly what the mercurial candidate really intends to do based on his actions during his first term — and comments he has made recently — it seems as if China will be in his crosshairs yet again.
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Assuming Trump wins the election and does restore higher tariffs on China, here’s the impact it may have on your wallet.
Trump’s China Position During His First Term
During his first term, President Trump riled markets — not to mention the global economy — by imposing steep tariffs on China.
Although his tariff campaign began with various tariffs on all countries, including a 25% tariff on all steel imports and a 10% tariff on aluminum, eventually Trump moved to a position of imposing a 25% tariff on $200 billion of Chinese goods. A series of negotiations back and forth between China and the U.S. had a variety of outcomes, ranging from temporary suspensions of tariffs to additional tariffs being imposed.
What Trump Has Said His Plans Are for China If He Wins a Second Term
On Jan. 27, 2024, the Washington Post reported that Trump was discussing with his advisers the potential of imposing tariffs of 60% on Chinese imports. On Sunday, Feb. 4, Trump confirmed this on Fox’s “Sunday Morning Futures,” saying, “We have to do it” and them embellishing even further, stating, “Maybe it’s going to be more than that.” This is in addition to the blanket 10% tariffs that Trump wants to impose on all imports.
Interestingly, despite his somewhat combative stance towards China regarding trade policies, Trump told Fox, “I like President Xi a lot. He was a really good friend of mine during my time.”
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The Effects China Tariffs May Have on the Stock Market — and Your Wallet
Although it’s impossible to predict the specific results of any trade war, based on the outcome of Trump’s first term, it’s fair to say that costs would likely increase for the average consumer. According to the American Action Forum, which is actually a conservative think tank, individual Americans bore the brunt of Trump’s tariff actions, to the tune of some $195 billion.
Additionally, according to a study conducted by the U.S.-China Business Council, the tariffs resulted in the loss of more than 245,000 U.S. jobs. An “escalation scenario” included in the study projected that the U.S. economy would shrink by $1.6 trillion over five years if tariffs were to continue increasing.
While these studies referenced the tariffs Trump imposed during his first term, it’s not a stretch to imagine that a second Trump term could result in similar or even greater economic effects. As tariffs in Trump’s first term peaked at 25%, a boost to 60% in his second term could increase the economic damage significantly.
How You Can Take Steps To Prepare
Individual Americans don’t have much control over tariffs and the global supply chain, but least if you can see them coming, you can try to take steps to avoid the worst consequences when it comes to your wallet.
Although all prices might go up if Trump slaps a 10% tariff on all imports, the 60% tariff on China will bring the most disruption. Buying domestic goods can be an option, as prices shouldn’t go up nearly as much as those on goods made in China. This, of course, is one of the main objectives of Trump’s trade war in the first place.
If you still prefer to buy foreign goods, seek out those that are made anywhere but China. If you’re really afraid of what a second term for Trump might do to prices, stock up on items you need now before there’s any hint of a trade war becoming more than just rhetoric.
Would There Be Any Winners in a Renewed Trump Trade War?
From an investment standpoint, when there are losers, there are also usually winners somewhere. A trade war with China could hurt both the Chinese and American economies, but Mexico and Southeast Asia might pick up the slack.
In anticipation of a potential Trump second term, many companies have reported that they are already shipping their goods to Mexico first, then bringing them into America from there. According to CNBC, as much as 15% of China’s trade is now bound for Mexico before America. As an investor, this could make Mexico worth a look under a Trump re-election.
Similarly, ASEAN nations could benefit from increased tariffs on China, as production and other parts of the supply chain may move to neighboring countries. According to Chris Rogers, head of supply chain research for S&P Global, “a 60% tariff could lead to another round of transformation. Now the winners there, have partly been Mexico, but it’s also been the ASEAN countries. So that’s included primarily Vietnam, Malaysia, Indonesia, and others.”
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