On April 15, 2025, the 217th conference of Academic Frontiers in Finance was held at Think Tank of Fudan University, with the theme of The Economic Impact of 'Reciprocal Tariffs'. The report pointed out that the Trump administration launched the reciprocal tariffs plan in early April, imposing taxes starting from 10% on all countries, and as high as 84% tariffs on China, which triggered severe shocks in the global financial markets and stimulated countermeasures and negotiations of varying degrees in many countries.

The report reviews the historical evolution of the US tariff policy, from the McKinley era to the Smoot-Hawley Act during the Great Depression, signifying that trade protectionism is prone to evolve into a global economic crisis. The current reciprocal tariffs policy, which expands the scale of taxation for the sake of national security, is not only logic-simplistically calculated, but also reinforces its intention to control the global trading system through differential pressure on allies and negotiating leverage tactics such as the Haihu Manor Agreement.

The report states that this round of tariffs will push up US inflation by 1.5-2% in the short term, while dragging down the GDP growth rate of about 0.4-0.9%, forming a stagflation pressure and postponement of expected Fed rate cuts. In the longer term, the US may encounter deflation risks like contraction in consumption, business investment decline and capital expenditure slowdown.

China's export structure is becoming more diversified, leading to its declining dependence on the US and a certain buffering capacity against reciprocal tariffs. Countermeasures are generally mild, but part of the industries such as machinery, daily necessities, textiles and other exports will still be significantly affected. In the future, we need to expand domestic demand and enhance the localization of high-end industries to cope with the impact of export compression, with several areas potential to replace U.S. products.

Citing opinions from a number of experts, the report points out that the US tariff policy will ultimately exacerbate its own trade deficit and social instability. The countermeasures, games and adjustments triggered by reciprocal tariffs on a global scale may become the fuse for a new round of reshaping of the trade pattern.

Translated by Yifan JIA

Full text in Chinese available at:

https://mp.weixin.qq.com/s/At8XP26O6LS-V8aUNNG1bA