So, that happened. In what should be a shock to no-one if you listened to the campaign trail promises, U.S. President Trump imposed tariffs on virtually every country on Earth, although the vast majority of these rates has now decreased to 10%.
The main sticking point is that a tariff on China remains hard-set at a whopping 145% as of writing, with China’s retaliatory tariffs hitting 125% on U.S. imports coming in. China and others have also been selling off U.S. government bonds, causing volatility in the U.S. bonds market, and is even mulling blanket banning U.S. entertainment exports like movies according to some rumors.
Why does this matter? Well, since America imported $439.9 billion worth of goods from China in 2024, adding a 145% tax on those imports has a variety of short and long term consequences.
While the Trump administration has now removed many types of electronics from its tariff blitz on China, the markets remain concerned that they could become targeted again in the future. Devices like Xbox consoles, Surface laptops, Apple iPhones, and many more are at least in part, if not completely, manufactured in China. Some estimates have suggested an iPhone could hit $3000~ if tariffs of this type were to be maintained.
This is of course disregarding wider consequences for global prices, supply chains, the value of the U.S. dollar, and general instability that this trade war could create.
The thought process is that, by making importing goods from China more expensive, it should incentivize manufacturers to build plants in the United States for manufacturing goods. However, training staff, building new sites, logistics, and so on, will incur significant costs in the short to long term even.
Whether manufacturing in the U.S. to avoid tariffs or paying the tariffs on goods coming in from China, companies will invariably pass on their added costs to consumers. We saw this during the pandemic, when trade was heavily impacted by lockdown scenarios.
An uneven playing field?
It’s true that China enjoys something of an unlevel playing field when it comes to trading with the West. As a basic example, Western companies like Xbox, Ubisoft, and so on, have to give away their IP to Chinese firms in order to make any money whatsoever in the market. American games like World of Warcraft, for example, are published by Chinese firms like NetEase in China, who end up taking a lot of the profits away for the privilege. I’ve been told during conversations with publishers dealing with China in this way that there’s very little left over for U.S. companies at the end of the “deal,” which could be why the Blizzard-NetEase link up spectacularly imploded a few years ago, before being rekindled.
NetEase is publishing Overwatch 2 in China, while also competing with it with their own game Marvel Rivals … which they license from U.S.-based Disney. Indeed, there’s no legal recourse if a Chinese company steals intellectual property from a Western company, unlike the inverse. This is just one example — some commentators say there’s no choice but to enter into unfair deals like this, or you risk simply having your copyright taken by force, with no legal recourse available.
On the flip side, Microsoft, Apple, et al. get to enjoy manufacturing their Xbox consoles, iPhones, laptops, and so on, for much cheaper than they would otherwise be able to do in America, and these savings are then passed on to consumers. A Surface laptop or Xbox console manufactured in the West would be hundreds of dollars, maybe thousands, more expensive if made in Europe or America — that’s assuming the expertise and logistics even existed.
To some degree, some commentators say (or hope) that the tariffs seem to be some form of strong-arm negotiation tactic in an attempt to level out some of these functional imbalances. Perhaps the Chinese Communist Party will open itself up to global intellectual property norms. Perhaps big tech companies invest more in bringing manufacturing back to the United States. There’s plenty of reasons to be sceptical about this approach, of course, especially in the short to medium term.
In the short term, the volatility in the economy across the entire world is going to have a variety of impacts, foreseen and perhaps less foreseen. Retirement funds that are tied to the stock market have also been heavily impacted, as well as investments in general, as money managers seek safer assets. Supply chains across the world are set to get more expensive, which could impact everything from laptops to domestic cleaning products.
So, we ask you, humble readers, has the trade war had a material impact on you so far? Has it changed your purchasing plans for the year? Are you annoyed that the Nintendo Switch 2 preorders are postponed?! Let’s discuss the craziness in the comments.
