China has received another tariff from President-elect Donald Trump, just after they requested diplomatic talks with the upcoming administration.
Trump shared that announcement on his social media platform, Truth Social, which will enact an additional 10% tariff on all Chinese goods entering the US This statement comes after a blog where Trump explained that he would be increasing all their merchandise from Mexico and Canada to have tariffs of 25%, effective from January 20 after he takes office.
According to CNBC, the 25% tariff increase would break apart the already existing trade pact, which is called the North American Free Trade Agreement (NAFTA), and that the implementation of the policies would mean a move to more protectionist ways.
Trump's decision to raise tariffs comes in response to several key issues, including illegal immigration and the flow of illicit drugs such as fentanyl from China and Mexico into the US The president-elect has frequently criticized both China and Mexico for not doing enough to control the trafficking of fentanyl, which has contributed to thousands of overdose deaths in the US Trump has been saying that even as negotiations are going on, China has not stood up to its commitments, particularly the severe punishment for the drug traffickers.
As a punitive measure, he has threatened to raise tariffs, which will help flow less of these harmful substances into the country.
Read More: China Seeks Diplomatic Talks With US Following Trump's Threat of New Tariffs to Avoid Trade War
US Relations to Countries with Increased Tariffs
While the Trump tariff plan will adversely impact China and its trade practices, it will also have a negative impact on US relations with Mexico and Canada.
Economic experts believed that China could respond by cutting interest rates, increasing fiscal stimulus, and letting the currency depreciate. All are aimed at neutralizing the economic impact of the US tariffs.
A Chinese embassy spokesperson emphasized that while China denies Trump's fentanyl trafficking claims, the economic and trade relationship between the two countries is too important. Beijing is always open to diplomatic communication with the US on the issue. Otherwise, ongoing trade tensions between the US and China may expand into a full-blown trade war, although it is considered unlikely that China will respond aggressively due to their continued deep interdependence, per CNN.
However, what China can't control is the global market's reaction, which already saw the American dollar appreciating against other countries, such as the Chinese yuan, Mexican peso, and Canadian dollar. For now, financial experts are on stand by to observe how other countries will react to these developments.
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