Unwelcome reciprocity, uncalled-for war

Trump’s towering tariffs are reprieved for 90 days within 15 hours of getting into collection in all US ports. It is, however, not the end of the brutal reciprocation based on a formidable calculation, rather only a pause. Remaining armory of protectionist tariffs is very much in play - 10 percent baseline on all US bound goods and services, 25 percent on automobile, 20 percent on iron & steel and 125 percent on goods originating in China. Denying the long-standing partnerships, disregarding the WTO framework, discounting the prevailing tariff structure these delusional tariffs are slapped waging a war which is still unfolding.

The Chinese twists and turns

In February, Trump administration had initially imposed a 10 percent tariff on all Chinese goods tying it to the country’s alleged role in aiding illegal immigration and getting fentanyl into US soil. Despite the shockwave China continued to trade with America and maintained its 3rd position in the global table of US trade partners only after Mexico and Canada. In March the rates were doubled. On Apr 2, in the infamous public announcement of reciprocal tariff China was further slapped a 34 percent. This time the republic reacted and slapped back the same 34 percent on all China-bound American products. 

On Tuesday, Apr 8 Trump smacked a further 50 percent tariff just because Beijing did not back off on its promise to impose retaliatory 34 percent import duty. The total tariff for every 100-dollar worth of Chinese goods reached an astronomical 104 dollars! On Wednesday afternoon when the global reciprocal levies are leashed 104 was further escalated to 125 percent.

China’s full-scale response to this new all-time-high 125 percent is yet to come. What would be their way forward when they have so many weapons in their arsenal! Not to forget, there are American giants who import from China only like Apple their iPhone or Tesla their car parts. China is the biggest producer of American shoes, men and women combined.

Also, China owns nearly nine percent of US bonds ($768.6 billion out of $8,634.6 billion). By the bonds America’s total debt is measured. One can say America is indebted to China to the three quarters of a trillion dollars. What if China now plans to sell the bonds?

Word is out in social media, that it is the bond market that became the game changer. The spike in yields on the 30-year and 10-year bond, which showed that people were dumping bonds as they were losing confidence, concerned the White House. Japan holds $1.06 trillion in US treasury securities; they were the biggest seller yesterday. This prompted the 90-day stall.

In a move that stunned traders, analysts and policymakers alike, China has just announced a complete halt on all LNG imports from US.

This is not just another trade dispute. This is a calculated strike, one that could reshape the global energy balance, upend supply chains and leave US lost in limbo!

The Republican anticlimax

The whole new tariff scheme does not look like well thought of. Trump took office on Jan 20; the word of a reciprocal tariff structure came out in Feb, public announcement on Apr 2 and execution a week after. Eighty years of careful crafting, brutally dashed out in 80 days of the Republican administration.

Historically however, Republicans were the proponents of free trade and Ronald Regan’s famous speech before Japanese premiers’ visit to US in 1987 is still remembered as a solid foundation on which the free world thrived following forty years. Indeed, throughout the world there is a growing realization that the way to prosperity for all nations is rejecting protectionist legislation and promoting free and fair competition.

Alas, protectionism is what Trump is bringing back for American industries, this is a reversal of human history. These tariffs are a form of economic illiteracy (John Bolton, former US Ambassador to the UN, GW Bush administration), economic vandalism (Richard Quest, Editor-at-Large, CNN) cascade of mistakes (Brent Neiman, Professor of Economics, University of Chicago).

Bangladesh perspective

Some newspapers ran reports that GAP, Levis and Walmart have stalled their orders from Bangladesh for the time being, GAP also passed on a request to shoulder the new tariffs to countries of origin. Bangladesh may face a bigger tariff bill than thought (Jasmin Malik Chua, Sourcing Journal).

It is certainly very challenging time for Bangladeshi RMG exporters, especially for those who supply in America. Our industry has never encountered such a crisis since the fall of Rana Plaza. But the silver lining here is that it is a global crisis which we will navigate through in a collaborative manner unlike child labor or factory fire which were home grown.

Honorable chief advisor has written to Donald Trump, listed the goods that we import for free (agro-based products, scrap metal), products we are cutting down tariffs on (gas turbine, semiconductor) and planning to set up bonded warehouse for (cotton). These are all applaudable and quick actions which are bound to keep lasting impacts.

In addition, we can dig deep into the US interest and involvement in the existing and new initiatives in the regional cooperation and connectivity. Besides the annual partnership dialogue in the Trade and Investment Cooperation Forum Agreement (TICFA), we can pursue more talks on a wide range of areas including security, counterterrorism, and Rohingya repatriation. Also, in TICFA we discussed issues like factory relocation from China in the past. There was never a better time than now to reinforce that.

We exported 76 major kinds of products to US in the first 8 months of the current fiscal year (July 2024 to February 2025) but the poor composition of it is painful. Articles of apparel knitted or crocheted and not knitted or crocheted sit tight on the top of the table with 5.07 billion dollars’ worth of export holding an 86.9 percent share of our total export to US ($5.83 billion in 8 months). Footwear is the only other category that could cross a 200-million-dollar mark.

The harsh reality is that our excessive dependence on readymade garments is still omnipresent. We are not going to repeat the diversity prescription here as indeed our export to the US is quite diversified already. Entrepreneurs and government are trying everything from pharmaceuticals to ceramic ware, from toys and games to glass and glassware or from electrical machinery to plastics and articles thereof to feed the target destination.

Sun is shining on shoes now. America will source more shoes from favorable countries like Cambodia, Vietnam or Indonesia to fill in the Chinese vacuum.

The endgame

No one knows what the end game looks like. Will there be a court order for reinstating the previous rates, will there be tailor-made rates for all approaching allies, will the sheer-madness cease in the face of global disruptions, will defying China soften down or be more retaliating, will the bipartisan resolution to repeal global tariffs and restore congressional authority over trade gain some momentum?

While we do not have a sure-fire answer for any of those questions, many signs are flashing that the US is slowly proceeding towards a recession. From hiking prices to more and more government job cuts, from rising inflation to broadening unemployment, an economic downturn is looming large.

If some answers were available to the questions listed above, then we might be able to push the recession back but what seems more irreversible now is a that the transactional President has put United States’ credibility into question and stability into long term uncertainty.

- The writer is a former commercial counselor at the Los Angeles Consulate. He can be reached at amamoon42@gmail.com