In recent years, China has become more adept at bypassing US trade restrictions. Instead of directly exporting products to the US, Chinese manufacturers increasingly send parts or semi-finished goods to third countries like Vietnam or Mexico. These parts are assembled into finished goods, labeled as local products, and then shipped to the US. Officially, the goods are not from China, but China's share in the value of such products has risen significantly, reaching 22% in 2023 versus 14% in 2017.
The US administration, particularly Donald Trump's team, is aware of these loopholes and intends to close them. Plans include higher tariffs not only on Chinese goods but also on intermediaries. Up to 70% of Chinese exports to the US and more than 2% of China's GDP could be at risk. This would deliver a notable blow to the Chinese economy.
Stricter measures could also affect third countries cooperating with China. Fears of US sanctions may reduce their business ties, potentially causing China to lose not only the American market but also many logistical partners in global trade supply chains.
The US could implement stricter control over the origin of product components, escalating logistics costs for exporters. China might respond by relocating production, but that is a complex and expensive process.
Tariffs will impact average Americans too: by 2025, they could add at least 2% to inflation, translating to over $2,000 a year in additional costs per family. Everyday goods—clothing, shoes, food—will be particularly affected.
In response, China is raising tariffs on American agricultural products and energy supplies. The US is pressuring third countries to sign trade agreements or face new tariffs. Evasion schemes are being investigated, but businesses often find new ways around restrictions, limiting the impact of enforcement.
Global economic restructuring is underway, with countries gravitating towards either the US or Chinese blocs. The US is trying to reduce its dependence on China, but implementation mechanisms remain vague, and competition is intensifying. Further US pressure could affect not just China but also America's key partners, presenting new challenges for global trade.
