General Trade War Updates
CHINA: Yesterday, we reported that the White House had indicated plans to escalate its counteractions against China, adding an additional 50% to the existing reciprocal tariff. As of today, April 9th, all cargo bound for the U.S. from China is now subject to a staggering 104% tariff. In response, China retaliated overnight by raising its U.S. import tariff from 34% to 84%. This marks the latest development in the ongoing trade dispute. A few days ago, China also implemented a "license program" to control the export of seven rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—critical to U.S. technologies. These rare earths, almost exclusively sourced from China, play vital roles in military systems, commercial and military aviation, semiconductor manufacturing, and medical lasers, among other high-tech sectors. In a statement, China invoked the saying, "Courtesy demands reciprocity," emphasizing the need for balanced actions.
VIETNAM: Vietnam is in talks with the U.S. to explore options for reducing or mitigating reciprocal tariffs. While negotiations have been ongoing, no major progress has been made. Vietnam has offered to eliminate import tariffs entirely, remove trade barriers, and comply with U.S. requests. It has been reported that the U.S. is considering a mandate for Vietnam to purchase a range of commercial aircraft, military defense systems, automobiles, and over $300 billion worth of U.S. energy products. Sources suggest that these negotiations could extend until as late as Fall 2025, indicating that tariffs may persist for some time.
OTHER COUNTRIES: In addition to China and Vietnam, approximately 70 countries are reportedly engaging in negotiations with the U.S., according to the U.S. Trade Representative (USTR). However, based on publicly available information, it appears that the U.S. is seeking more than just the removal of tariffs. The White House seems to be requesting extensive concessions, including military and energy purchases, commitments to combat drug trafficking, and efforts to reduce pollution, particularly plastic pollution in the Pacific Ocean. This suggests that these negotiations could take a long time and are unlikely to be resolved in the near future.
INDIA’S ECONOMIC CONCERNS: India is facing significant economic challenges due to the impact of tariffs on production and exports. Finance Minister Nirmala Sitharaman has indicated that the Indian economy will require support from both the Reserve Bank of India (RBI) and the government. The RBI's Monetary Policy Committee recently lowered the repo rate for the second consecutive time by 25 basis points to 6.00% in an attempt to stimulate economic growth. While Sitharaman remains optimistic about the potential for domestic growth, she acknowledged that it is time to conclude the ongoing trade deal.
PHARMACEUTICALS: Initially, President Trump excluded pharmaceuticals from additional country-specific tariffs in the first round of reciprocal actions. However, the pharmaceutical sector has been a major topic in recent discussions, with Trump repeatedly referring to the industry's relocation as a matter of national security. Today, global pharmaceutical stocks plunged after Trump doubled down on his threats. He reiterated his plan to incentivize drug companies to bring operations back to the U.S., stating that tariffs would encourage this shift. Experts, however, have raised concerns about the challenges and complexity of relocating pharmaceutical manufacturing to the U.S., citing the significant investment and time required. Bernstein analyst Courtney Breen estimated that establishing a new "greenfield" site would cost an additional $2 billion and take up to five years to become operational.
EU RETALIATION: The European Union has announced its first round of countermeasures in response to the U.S.'s reciprocal tariffs. The EU plans to impose a 25% tariff on a range of U.S. imports as part of its retaliation.
Talks with many countries are ongoing, with President Trump scheduled to speak with Vietnam today and having recently met with Japan and South Korea. Administration officials have indicated that tariffs may not be lifted anytime soon, and additional tariffs could be on the horizon.
