U.S. Imposes 145% Tariffs on China, 25% on Japanese Autos; India Faces $100bn Deficit as Trade War Escalates

The United States, led by President Donald Trump, has imposed tariffs of up to 145% on Chinese goods, with China retaliating with 125% tariffs on U.S. products. This escalation has sharply contracted bilateral trade, reducing container traffic by 60% and potentially shrinking annual trade by as much as 80%. The U.S. also removed the 'de minimis' exemption for low-value Chinese imports, resulting in immediate price hikes and affecting companies like Shein and Temu. The baseline U.S. tariff on most countries is now 10%, with sector-specific tariffs such as a 25% levy on Japanese automobiles. Some reciprocal tariffs have been suspended for 90 days.

Global markets are feeling the impact, with negative growth in the U.S. GDP in the first quarter of 2025 and downward revisions in economic forecasts for other major economies. The uncertainty of U.S. trade policy is causing job cuts, supply chain disruptions, and a decline in business confidence. In China, efforts to redirect exports to the domestic market have led to intensified price competition, deflationary pressures, and risks to 16 million export-dependent jobs. Economists estimate a potential 0.5–0.8% reduction in Japan's GDP if tariffs persist.

Japan is negotiating with the U.S. to remove reciprocal tariffs and the 25% automobile levy, using negotiation cards such as rice, soybeans, corn, and vehicles. The Japanese government is also considering expanding imports of U.S. agricultural products and simplifying safety inspections for U.S. vehicles. Talks are expected to intensify, with a possible meeting between Prime Minister Ishiba and President Trump at the G7 summit in Canada. Japan is also managing its diplomatic ties with China, as evidenced by recent exchanges between Japanese and Chinese leaders. The ban on Japanese seafood exports to China remains in place.

India is facing a surge of cheap Chinese goods diverted from the U.S. market, particularly affecting its textile and steel industries. The Indian government has imposed a 12% tax on some steel imports and is investigating dumping practices. India's trade deficit with China has reached $100 billion, and its reliance on Chinese components persists despite efforts to boost domestic manufacturing.

China is responding to the trade war by promoting domestic demand, supporting small businesses, and strengthening regional trade ties, including with Southeast Asia, now its largest export market. The Chinese government has enacted laws to facilitate retaliation and reduce dependence on U.S. financial systems. Despite deflationary risks and economic slowdown, Beijing is focusing on self-reliance and expanding partnerships with countries like Japan and the European Union.