{"id":83831,"date":"2025-04-10T10:12:35","date_gmt":"2025-04-10T15:12:35","guid":{"rendered":"https:\/\/mascolombia.com\/china-responds-strongly-to-trumps-tariffs-how-the-global-economy-is-shaken-up\/"},"modified":"2025-04-10T10:15:09","modified_gmt":"2025-04-10T15:15:09","slug":"china-responds-strongly-to-trumps-tariffs-how-the-global-economy-is-shaken-up","status":"publish","type":"post","link":"https:\/\/mascolombia.com\/en\/china-responds-strongly-to-trumps-tariffs-how-the-global-economy-is-shaken-up\/","title":{"rendered":"China responds strongly to Trump\u2019s tariffs: how the global economy is shaken up"},"content":{"rendered":"\n

The second trade war initiated by U.S. President Donald Trump has escalated significantly in recent days, especially in relation to China. On April 2, 2025, Trump\u2019s tariffs of 34% on Chinese goods, a move that was responded to by Beijing with similar tariffs on April 5. In reaction, Trump announced an additional 70% increase<\/strong>, raising tariffs to 104%<\/strong> on Chinese products, a measure that was increased to 125%.<\/strong><\/p>\n\n

Trump\u2019s tariffs policy has also been extended globally: the administration has implemented a 10% global tariff on all of its trading partners<\/strong>, arguing that these measures already generate revenues of $2 billion per day for the US.<\/strong><\/p>\n\n

You may read: Trump\u2019s tariffs hit Colombia: manufactures, flowers and coffee among the hardest hit<\/strong><\/a><\/p>\n\n

China has reacted with a restriction on the export of rare earths, essential minerals for U.S. technology and defense industries<\/strong>, underscoring U.S. dependence on these strategic inputs. In turn, Trump\u2019s tariffs escalation has generated instability in the financial markets and significantly impacted the value of the dollar.<\/strong><\/p>\n\n

\"dollar,
<\/figcaption><\/figure>\n\n

The \u201cMar-a-Lago Accord\u201d and the exchange rate strategy<\/h2>\n\n

Regarding Trump\u2019s exchange rate strategy, his administration has considered the possibility of devaluing the dollar to improve the competitiveness of U.S. exports and reduce the trade deficit.<\/strong> This proposal, known as the \u201cMar-a-Lago Accord,\u201d seeks to emulate the 1985 \u201cPlaza Accord,\u201d<\/strong> which succeeded in depreciating the dollar by pressuring major economies.<\/p>\n\n

The strategy consists of pressuring U.S. trading partners through high tariffs<\/strong> in order to force them to appreciate the value of their currencies, thus weakening the dollar and favoring U.S. products. This tactic, based on Trump\u2019s tariffs, attempts to replicate the effects of the Plaza Agreement, albeit in a more confrontational political and economic context.<\/strong><\/p>\n\n

Doubts about the viability of the agreement<\/h2>\n\n

However, the viability of the \u201cMar-a-Lago Agreement\u201d<\/strong> has been widely debated. Experts such as Naoyuki Shinohara, a former Japanese diplomat, have expressed skepticism about achieving a coordinated depreciation of the dollar, given the low likelihood of cooperation from China and the European Union in the context of current trade tensions.<\/p>\n\n

In addition, an eventual massive sell-off of U.S. Treasury bonds by foreign central banks could further destabilize financial markets.<\/strong> Diplomatic pressure on allies to appreciate their currencies could also strain international relations.<\/p>\n\n

This is just what China, a major creditor of the United States, has done unilaterally and has reduced its holdings of U.S. Treasury bonds. At the end of January 2025, it held approximately USD<\/strong> $761 billion<\/strong>, a significant decrease from more than USD $1.3 trillion<\/strong> in previous years.<\/p>\n\n

This reduction as a response to Trump\u2019s tariffs, has generated the 5-year US Treasury bond to rise by 2%, the 10-year by 3.2%, and the 30-year by 3.6%.<\/p>\n\n

It also reflects a strategy of diversifying international reserves and decreasing dependence on the dollar, which strengthens China\u2019s financial autonomy.<\/strong><\/p>\n\n

It also adds to the depreciation of the yuan by the Chinese Central Bank, which is expected to continue.<\/p>\n\n

\"China
<\/figcaption><\/figure>\n\n

You may also read: Colombia facing Trump\u2019s tariffs: drop in sales and lower competitiveness<\/strong><\/a><\/p>\n\n

Inflationary effects and pressure on the consumer<\/h2>\n\n

Trump\u2019s tariffs have generated inflationary pressures in the U.S. economy. For example, Bill Dudley, former head of the New York Federal Reserve, projects inflation of 5% over the next six months<\/strong>. Tariffs raise the cost of imported goods, which translates into higher prices for consumers.<\/strong><\/p>\n\n

The value of the dollar also influences inflation: a strong dollar makes imports cheaper, but reduces the competitiveness of exports; a weak dollar makes imports more expensive and increases domestic inflation.<\/strong><\/p>\n\n

Consequences of Trump\u2019s tariffs on the oil market<\/h2>\n\n

The escalation of the trade war and Trump\u2019s tariffs has significantly affected the energy market. Following the imposition of the 104% tariff on Chinese products<\/strong> and the Chinese retaliation of 84% on U.S. products<\/strong>, the price of Brent crude oil fell below $60 per barre<\/strong>l, its lowest level since 2021. West Texas Intermediate (WTI) also fell to 57.12 dollars per barrel, down 4.13%.<\/strong><\/p>\n\n

This decline responds to fears of a global economic slowdown, which could reduce energy demand. Added to this is OPEC+\u2019s plan to increase production by 411,000 barrels per day in May<\/strong>, which increases the risk of oversupply.<\/p>\n\n

\"Oil
<\/figcaption><\/figure>\n\n

Impact on the fracking industry<\/h2><\/h2>\n\n

Although low crude oil prices may alleviate inflationary pressure, they also represent a challenge for the U.S. oil industry, particularly for shale oil (tight oil) production<\/strong>, which is done through fracking.<\/p>\n\n

In 2023, the U.S. produced 3.04 billion barrels of tight oil,<\/strong> equivalent to 8.32 million barrels per day<\/strong>, which accounted for 64% of its total production<\/strong>, according to the U.S. Energy Information Agency (EIA). However, many fracking operations need prices above $60-70 per barrel<\/strong> to be profitable. If prices remain low, investment and production could decline, directly affecting this industry.<\/p>\n\nhttps:\/\/mascolombia.com\/en\/petros-government-relaxes-position-and-strengthens-cooperation-with-u-s-after-kristi-noems-visit\/

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The new escalation in the US-China trade war, marked by Trump\u2019s tariffs of 125%, generates financial volatility, inflation and impact on oil prices.<\/p>\n","protected":false},"author":1,"featured_media":83750,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"rank_math_focus_keyword":"trump's tariffs","rank_math_title":"","rank_math_description":"","rank_math_primary_category":"753","footnotes":""},"categories":[753],"tags":[1281],"mc_distribution":[989],"class_list":["post-83831","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-international-trade","tag-articulo-en","mc_distribution-suscriptores-generales"],"acf":{"euro":0,"dolar":0},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/posts\/83831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/comments?post=83831"}],"version-history":[{"count":0,"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/posts\/83831\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/media\/83750"}],"wp:attachment":[{"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/media?parent=83831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/categories?post=83831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/tags?post=83831"},{"taxonomy":"mc_distribution","embeddable":true,"href":"https:\/\/mascolombia.com\/en\/wp-json\/wp\/v2\/mc_distribution?post=83831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}