The first three weeks of US President Donald Trump’s second term have introduced significant uncertainty and chaos into global supply chains. Trump imposed tariffs on Canada, Mexico and China and suspended the de minimis exemption, ostensibly to address the illicit fentanyl trade, before walking back on some of the actions.
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As business leaders navigate the unpredictable changes in Trump’s trade policies, China must develop strategies to sustain its economic growth while anticipating a continuation of the decline in direct trade with the United States since 2022.
As of now, his threatened 25 per cent tariffs on Canada and Mexico will be paused for 30 days to allow for actions by the two countries to enhance border enforcement against illegal immigration and drug smuggling. Meanwhile, China faces an additional 10 per cent tariff.
The suspension of the de minimis rule, which allows shipments valued at less than US$800 to enter the US duty-free, was intended to curb fentanyl shipments. It was also expected to disrupt online retailers such as Temu and Shein.
However, its implementation lacked forethought and was further complicated by the pending confirmation of Howard Lutnick as Trump’s commerce secretary. Less than a week after suspending the de minimis rule, Trump reversed his position and restored the exemption.
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As Trump’s unpredictable trade policies inject further uncertainty, China must develop strategies to stimulate its slower-than-expected post-pandemic economic growth. China’s industrial output grew in 2024 by 5.8 per cent year on year, while retail sales grew by just 3.5 per cent. This indicates a need for more robust measures to stimulate domestic consumption.