China: Buckle up for 'Liberation Day' - Standard Chartered

The US has limited room to further hike tariffs on China under the Reciprocal Tariff Act. But tariff uncertainty remains high; result of the US-China 2020 Phase 1 trade deal review is crucial. The proposed US port fee, if implemented, could disrupt global shipping, Standard Chartered's economists note. 

The eye of the storm

"The US has limited room to further hike tariffs on China under reciprocal terms, in our view, as it nears the conclusion of its trade investigations under the Reciprocal Trade Act. Reciprocal tariffs are due to be announced on 2 April - termed 'Liberation Day' by Trump. We estimate that the average US tariff on China is currently 15ppt higher than China's average tariff on the US. Even if the US treats VAT as a trade barrier, China's highest VAT rate is 13%, still lower than the current US-China tariff differential. But uncertainty regarding trade restrictions is still high, and the result of the 2020 Phase 1 trade deal review could be crucial. "

"Trump has already announced a 25% tariff on all foreign-made cars (including parts), effective soon. Pharmaceutical products, chips and lumber could also be targeted, but their tariff timing is uncertain. However, we expect the sectoral tariffs to  have a limited impact on China, as the average US tariff on China has already reached c.32%, which is higher than the recently announced sectoral tariffs. The planned 'secondary tariff' on Venezuela (effective 2 April) would also have a marginal impact on China; China's oil imports from Venezuela were only 0.3% of its total oil purchases in 2024." 

"Beside tariffs, the US has also hardened restrictions on China's investment, shipping, and AI industry. The Office of the US Trade Representative (USTR) has proposed port entrance fees for any shipping operator using China-made vessels. If the proposal becomes legislation, it will cause significant disruptions to global logistics and create an extra barrier to China's exports, in our view."