China has announced an increase in tariffs on American imports from 34% to 84% starting Apr. 10, according to its Office of the Tariff Commission of the State Council.

This decision follows a recent US tariff hike on Chinese goods, which raised tariffs to 104%.

The US has previously warned against such retaliatory measures.

In response to China’s actions on Apr. 2, the US implemented an additional 50% tariff increase, raising the total tariffs on Chinese goods to 104%.

🔗 Source: CNBC

🧠 Food for thought

1️⃣ Current tariff levels mark a historic reversal of post-WWII trade liberalization

The U.S.-China tariff war has pushed duties to levels not seen in nearly a century, with the U.S. tariff rate rising to 22.5%, the highest since 1909 1.

This represents a dramatic shift from the post-World War II consensus when international agreements like GATT progressively reduced tariffs to below 5% by the 1990s 2.

The current escalation mirrors the protectionist era of the 1930s when the Smoot-Hawley Tariff Act raised duties to unprecedented levels, triggering retaliatory tariffs that exacerbated the Great Depression 2.

China’s tariffs and America’s duties on Chinese goods represent a significant increase from typical pre-trade-war rates, potentially bringing bilateral trade between the world’s two largest economies to a near standstill.

This shift from decades of trade liberalization could fundamentally reshape global supply chains that were built on the assumption of continued open markets and low tariff barriers.

2️⃣ Household costs will be substantial and regressive

The Yale Budget Lab estimates these tariffs will increase overall price levels by 2.3%, costing the average U.S. household $3,800 annually in 2024 dollars 1.

Lower-income households will bear a disproportionate burden, with the poorest Americans facing annual costs of $1,700, confirming the regressive nature of tariffs as a tax policy 1.

Previous analysis of the 2019 China tariffs showed that the costs were fully passed through to American consumers rather than being absorbed by Chinese exporters, suggesting a similar outcome for these much higher tariffs 3.