Trump has less leverage over China than during prior trade war - Wells Fargo
Author
Scott Kanowsky
Economy
Published 02/05/2025, 06:16 AM
Investing.com - U.S. President Donald Trump may have "less leverage" in his recent trade spat with China than during a similar conflict in his prior administration, according to analysts at Wells Fargo (NYSE:
WFC).
This week, the Trump administration moved to slap a sweeping 10% tariff on all Chinese imports into the U.S., escalating trade tensions between the world's two largest economies.
In response, China’s finance ministry has said it will impose a 15% tariff on coal and liquified
natural gas imports from the U.S., and an additional 10% duty on
crude oil, agricultural equipment and automobiles from February 10.
Although some observers have noted that Beijing's retaliation was relatively restrained and a potential move to position itself for trade talks, it remains unclear when Trump and Chinese President Xi Jinping will speak about the matter. Trump has said he is in no rush to hold the discussions.
In January 2018, Trump, then in his first term in the White House, launched a barrage of tariffs on China over claims that it was conducting unfair trade practices, sparking a tit-for-tat exchange of levies.
Yet Trump's bid to approach the latest possible negotiations with China from a "position of power" may not work as well this time, according to the Wells Fargo analysts. In particular, they flagged that the trading relationship between the U.S. and China is now "significantly weaker" than it was during Trump's initial stint in office. The U.S. is importing less goods from China, while Beijing has established other partnerships with countries in Asia and has set up manufacturing capabilities in Mexico to circumvent U.S. duties, the analysts added.
"[The] U.S. tariff influence may not be as powerful, as China has made some necessary adjustments," the Wells Fargo analysts said in a note to clients. "In fact, an argument can be made the U.S. has become more dependent on China as a source of critical imports."
They added that, even though China's economy has been sputtering in recent months, Beijing's new foreign trading relationships could make officials in the country less incentivized to secure a new trade deal with the U.S.
