The United States has trade leverage with China, but not as much as Washington thinks
Much has been made of the fact that the United States is importing less from China than it was eight years ago when President Donald Trump first came into office. While this statistic is accurate, it only tells part of the story.
The United States has diversified its imports away from China for low value-added goods such as bedding, mattresses, and furniture. But diversification is proving far harder for higher value-added goods.
To understand why the incoming Trump administration is going to face a dilemma on how to execute its new tariffs, see our analysis on the top goods the United States is importing from China:
Smartphones, computers, lithium-ion batteries, toys, and video game consoles together made up 27 percent of US goods imports from China in 2023. US reliance on China for these goods has hardly budged since 2017. In fact, China’s share in US battery imports has actually increased in that time.
And even if there was more diversification, it wouldn’t solve the problem of US import reliance on China. Diversifying imports away from China doesn’t necessarily translate to lower exposure to Chinese industries. Vietnam, for example, has been among the largest benefactors of US attempts to diversify its imports. Vietnam’s share of US imports has risen steadily across several sectors where China’s share has decreased.
In response to the 2018 trade war, Chinese manufacturers moved factories to Vietnam, where they added some value to products before exporting to the United States. A strong correlation between Vietnam’s exports to the United States and Vietnam’s imports from China suggests these factories remain deeply dependent on Chinese intermediate goods and supply chains.
Analysts have also raised concerns that some Chinese goods are first shipped to China, designated as Vietnamese-origin exports to avoid US tariffs—despite no value being added in the country—and then exported to the United States. The US Department of Commerce concluded this was the case for solar panels in 2023 before imposing new tariffs on companies engaged in that trade.
At the same time, Chinese exporters are not as dependent on the US market for these goods. The global market for electronics produced in China is somewhat diversified:
Across-the-board tariffs that would include these goods may impact US consumers more in the short term through price increases than Chinese producers – especially if China extends support to its own companies.
There is a reason why the United States has not put tariffs on these goods already. In 2018, the Trump administration prioritized tariffs on intermediate goods to avoid direct impact on consumers. President Trump himself said in 2019 that tariffs on electronics were going to be delayed for the holiday season: “We’re doing this for the Christmas season, in case any of these tariffs would have an impact on US consumers.” The tariffs were never implemented.
What’s changed between now and 2019? Inflation is more of a concern than it was then. In fact, it is one of the reasons Trump was elected. While these five goods are insignificant within the US Consumer Price Index since consumers do not purchase phones or laptops regularly, the goods have very high public salience. The media will understandably focus on price changes on iPhones, for example. This makes it even more difficult to implement any significant new tariffs on these products.
That doesn’t mean there won’t be new tariffs on China—the question is which products will be the target. Think about electric vehicles (EV). President Biden put 100 percent tariffs on Chinese EVs. President Trump could add another 30 percent penalty—but only two percent of all US EV imports are from China. So while such a tariff may generate headlines, it would not translate into a meaningful shift in the trade relationship.
The bottom line is that while the incoming Trump administration is serious about tariffs, actually enacting them is going to be much more complicated given the current dynamics in the global economy.
Josh Lipsky is the senior director of the Atlantic Council GeoEconomics Center and a former adviser to the International Monetary Fund.
Mrugank Bhusari is assistant director at the Atlantic Council GeoEconomics Center focusing on trade and the international role of the dollar.
This post is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in getting the newsletter, email SBusch@atlanticcouncil.org
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Image: U.S. President Donald Trump waves during joint statements with China's President Xi Jinping at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Thomas Peter