Fred Teng

Opinion | Trump’s tariff obsession is no match for China’s growth model

While tariffs raise costs and disrupt trade, China’s approach fosters internal economic resilience and positions it as a leader in sustainable growth

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Fred Teng

Published: 8:30pm, 28 Nov 2024

US president-elect Donald Trump’s proposal for new tariffs on Canada, Mexico and China reveals striking differences in policy solutions employed by the world’s two largest economies. Trump’s tariffs starkly contrast with China’s plan to drive sustainable growth by boosting domestic consumption.

The results of Trump’s first-term tariffs reveal the pitfalls of protectionism while China’s pivot towards internal demand shows a forward-thinking approach to resilience and prosperity. These divergent strategies underline why Trump’s tariff proposal is ill-suited to solving America’s economic problems. If enacted, the US risks ceding global economic leadership to a more adaptive China.

During Trump’s first presidency, tariffs were a cornerstone of his trade policy. Levies on steel, aluminium and a vast array of Chinese goods were intended to reduce trade deficits, protect US jobs and revive manufacturing. Yet, the reality fell far short of these promises. Tariffs operate as taxes on imports. Businesses typically pass the costs onto consumers.

For American families, this meant higher prices on electronics, furniture and clothing. According to the Peterson Institute for International Economics, Trump’s latest tariff proposals would cost the typical American household over US$2,600 a year.

For businesses, the consequences were also stark. Many US manufacturers rely on imported raw materials and components. Tariffs raised production costs, making US goods less competitive both domestically and globally. Industries such as automotive manufacturing and construction faced steep price hikes for inputs like steel and aluminium, ultimately causing lay-offs amid negligible gains in job creation.

Retaliatory tariffs imposed by trade partners like China further compounded the damage. For instance, Beijing’s tariffs on US farm goods decimated demand for key exports such as soybeans and pork, forcing the US government to spend billions of dollars in subsidies to bail out struggling farmers.