The last few days have been marked by Trump’s procrastination on tariffs. One day he imposes very high tariffs on Canada and Mexico, lower ones on China, then he reverses the sanctions against the countries of the North American Free Trade Agreement. Such a strategy is a source of confusion and uncertainty.

Even though it is not yet complete, it already has major consequences on macroeconomic indicators in the United States. The external balance deteriorated sharply in January due to the very strong increase in imports. This must be seen as a desire to buy foreign products before the tariffs apply.
The Atlanta Fed, which measures the pace of GDP almost every day, suggests that this shock could push GDP growth into negative territory in the first quarter.

Economists fear this risk of tariff escalation. In 1930, US President Hoover signed a decree authorizing a spectacular increase in US customs duties (Smoot-Hawley). Combined with an overly restrictive monetary policy, these tariffs were a major element in the transmission of the American recession to the rest of the world. This led in particular to retaliatory measures, particularly in allied countries that felt betrayed. Some countries wanted to negotiate. Whatever the strategy, the impact was a sharp decline in world trade and American exports.

It is clearly not desirable to enter into a similar pattern. The world is really very interdependent after 30 years of deepening trade. Very quickly this would result in shortages that would have terrible consequences. We often think of what happened in 2021 on semiconductors. We do not want Washington’s strategy on these same semiconductors to result in a disorderly and unbalanced framework.

Another point to note is the strong reaction of Canada and Mexico but a more moderate attitude of China. The former obtained a reprieve, not China.
The Middle Kingdom has been suffering from successive shocks of tariff increases since 2017. They are now at 33% compared to just 3% in 2017 before the first Trump measures.
China has taken retaliatory measures but has not negotiated in the Oval Office so as not to risk being targeted. A Chinese person never wants to lose face and therefore does not want to take the risk of appearing like a puppet on a TV show.
However, China does not believe in the negotiation on Fentanyl and that it is only a pretext. The most important thing is that China has a longer horizon than immediate gesticulations. Choices are made for the long term and are part of the long term. China, convinced of its choices, particularly on technology, imagines that it will win in the long term.