No immediate tariffs announced on China, signaling a more transactional strategy under Trump 2.0. Tariffs on China are likely to be raised more gradually to allow negotiations on broader issues. US likely to broaden the tariff war to more countries, as the US C/A deficit continues to widen. China’s exports shift towards intermediate goods; global supply chain relocation to accelerate, Standard Chartered's economists Carol Liao and Madhur Jha note.

Tariffs on China held off, for now

"President Trump has pledged to enact 25% additional tariffs on Canada and Mexico as early as February. While he warned of another 10% tariff on China, his reasoning for this seems to centre around fentanyl flows from China. He noted that Europe “treats us very badly”, possibly signaling a different tariff strategy versus his first term – a more gradual approach to tariffs on China to allow for negotiations and concessions, but no longer targeted exceptionally at China."

"We see some low hanging fruit for China in terms of concessions it could make near-term, including curbing fentanyl trafficking more forcefully, increasing imports from the US, opening its services sector further, and allowing negotiations towards a TikTok joint venture with US participation. In addition, ahead of the next tariff hike, the central bank is likely to remain focused on CNY stability, which could delay a domestic policy rate cut. However, these moves may only temporarily ease tensions, with higher tariffs likely to come once the low hanging fruit is picked."

"In the face of the geopolitical challenges, China has prioritized boosting domestic consumption to support growth and lessen its reliance on external demand. Chinese firms are actively adapting by reshuffling their supply chains and investing overseas, with more value added occurring outside China. Under Trump 2.0, we expect the global supply chain reorientation to accelerate."