Since Donald Trump won the US presidential election, the discussion of the Sino US trade war has been “warming up”, mainly in three aspects:
First, Donald Trump threatened to impose 60% tariff on Chinese goods;
Second, Donald Trump threatened to kick Mexico out of the “US Mexico Canada Agreement”;
Third, Donald Trump threatened to levy 60% tariff on the goods at Qiankai Port in Peru.
The first point can be understood. Let’s focus on the second and third points, because these two points may seem to be aimed at Mexico and Peru on the surface, but in fact they are also aimed at China.
In 2018, Donald Trump launched a trade war against China. After Joe Biden came to power in 2020, the tariffs imposed during the Donald Trump period were not canceled. So some Chinese enterprises increased their exports to Mexico in order to avoid the high tariffs of the United States, and then continued to export to the United States through Mexico.
Look at the change chart of China’s exports to Mexico: the amount of China’s exports to Mexico has doubled from $4 billion per month in the Donald Trump era to $8 billion per month.

Due to the fact that Chinese goods are very cheap and other countries cannot compete with us, some countries often launch anti-dumping investigations against China in order to protect their own industries, and then take the opportunity to impose huge tariffs on some Chinese goods. So, some Chinese companies export their goods to third countries, and then third-party merchants export them to relevant countries, which is called “transit trade”.
For example, I am a shoe maker. In the past, a pair of shoes sold by Americans cost only $10. Now, the United States imposes 60% tariffs on Chinese goods. Americans want the same pair of shoes, which costs $16. This is a bit too expensive, which will inevitably lead to the weakening of my shoe competitiveness. What should I do? Since the United States imposed 60% tariffs on China, but did not impose tariffs on Mexico, I sold my shoes to Mexican businessmen at a price of $10, and then Mexican businessmen sold them to Americans at a price of $11.
In this way, all parties have interests: after the imposition of tariffs, Americans would have to spend 16 dollars to buy a pair of shoes, but after entrepot trade, Americans can buy an identical pair of shoes from Mexican businessmen for only 11 dollars, which is equivalent to less than 5 dollars; Mexican merchants earned $1 through “transit trade”; Chinese merchants have also successfully sold their products.
Why was Hong Kong so prosperous in the past?

In fact, China not only conducts transit trade through Mexico, but also through countries such as Vietnam, Malaysia, and India.
For example, in 2023, Vietnam’s trade surplus with the United States was $104 billion, and from January to September this year, Vietnam’s trade surplus with the United States has approached last year, reaching around $90 billion, three times that of 2017.
Do you think Vietnam can take away such a big piece of ‘cake’ from China in such a short period of time?
In fact, Vietnam’s exports to the United States have skyrocketed, with a large part of it being engaged in transit trade between China and the United States. By 2024, Vietnam China trade is expected to reach $200 billion, setting a new bilateral trade record for Vietnam.
Do you know how much Vietnam imported from China in 2017?
Only 90 billion US dollars!
Before the United States launched a trade war against China, Vietnam’s imports from China were only $90 billion, but now they have increased to $200 billion. How much of this is Chinese goods that are “washed” in Vietnam and then exported to the United States.
So, everyone, remember that we are not unable to avoid the US trade war – transit trade is one of the specialized ways to evade trade sanctions.
Perhaps some people may have questions: Can’t the United States prohibit countries such as Mexico and Vietnam from acting as intermediaries between China and the United States?
The issue involved is very complex.
Firstly, countries such as Mexico are sovereign nations and have the right to do business with China. Mexican or Vietnamese merchants import goods from China, and whether the imported goods are for their own use or exported to other countries does not violate relevant laws. Secondly, even if the United States enacts relevant laws, it is difficult to effectively “trace” – as long as the place of origin is not indicated, do you know if a bag of rice belongs to Zhang Sanjia or Li Sijia?
Of course, as long as the United States is determined to conduct “traceability” and even use various means to force countries such as Mexico and Vietnam to ban China’s transit trade, it can definitely be achieved, but at a relatively high cost.
The United States has threatened to impose a 60% tariff on goods from the port of Chancay in Peru for this purpose.
Bloomberg reported on the 16th that Mauricio Claver Carone, consultant of Donald Trump’s transition team, said in a telephone interview on the same day: “Any product passing through Qiankai Port or any port owned or controlled by China in the region should pay 60% customs duty, as if the product came from China.”

It seems that the United States has the means to force some countries to ban China’s “transit trade”, but the problem is: there are so many countries in the world, and doing China’s “transit trade” is profitable. Can the United States ban one or two countries, or can it ban all countries?
It is not impossible for the United States to block the path of “transit trade”, but it is very difficult and very offensive – the United States threatens a country to ban China’s transit trade, but soon another country will replace it (because there is profit), and the United States must no longer threaten that country… In the end, the United States has to threaten country by country. How many countries do you think it will offend?
The most crucial thing is that we cannot remain indifferent, we will inevitably launch countermeasures against the United States.
On November 15th, the Ministry of Finance and the State Administration of Taxation issued a notice adjusting the export tax rebate policy: starting from December 1st, 2024, the export tax rebate for aluminum, copper, and chemically modified animal, plant, or microbial oils, fats, and other products will be cancelled; Reduce the export tax rebate rate for some finished oil products, photovoltaics, batteries, and some non-metallic mineral products from 13% to 9%.

What does this announcement mean?
Assuming the value of a commodity is 100 yuan, with a cost of 80 yuan and various taxes paid to the state of 20 yuan, if you sell it for 100 yuan, you will have no profit.
In the past, in order to encourage Chinese companies to increase their exports, China made a regulation: if you sell this product to other countries at a price of 100 yuan, I will refund you 10 yuan in tax for each item sold. In this way, you will have a profit.
But think about it, if a certain commodity can only be produced by Chinese companies, or if the price of goods produced by Chinese companies is much lower than that of other countries, will we continue to adopt the export tax rebate model and make other countries cheaper for nothing?
For example, only Chinese companies can produce a certain type of chip. Assuming there are 100 companies in China that can produce this type of chip, these 100 companies will continue to engage in price wars in order to gain market share, ultimately resulting in chips that could have been sold at high prices being sold at cabbage prices.
At this point, we can cancel the export tax refund method – if we don’t refund you, you will have to sell at a higher price to make a profit.
Of course, for some products with monopolistic characteristics, we not only do not refund taxes, but we can also increase export taxes.
For example, China’s rare earths are basically in a monopoly position. Domestic rare earth enterprises are fighting price wars with each other in order to occupy the international market, resulting in other countries being able to purchase Chinese rare earths at extremely low prices. We cannot ban rare earth exports because it violates WTO rules and is prone to retaliation from other countries.
What should I do?
At this point, we can increase the export tax.
Before 2014, China’s export tariffs on rare earth metals reached 25%, while tariffs on tungsten iron and molybdenum iron reached 20%. However, later on, China was sued by European and American countries to the WTO, losing the case and being forced to cancel export tariffs on products such as steel particle powders, rare earths, tungsten, and molybdenum.
Previously, there were always people online criticizing the Chinese government for selling rare earth resources at a low price. In fact, there is no other way. If China wants other countries to recognize us as a “market economy”, it cannot restrict corporate competition, and the result of corporate competition is that our monopoly resources are sold at a low price by enterprises.
To put it simply, the root of the problem lies with the enterprises, not the government – under WTO rules, the government can do very little, while enterprises continue to expand production and engage in price wars in order to occupy market share, resulting in our rare earth resources being sold at a low price!
But now it’s completely different.
Since the United States launched a trade war against us, our government can retaliate by any means, including but not limited to measures such as exporting technology, export quotas, export licenses, and increasing export tariffs.

Seeing this, you can probably understand why Donald Trump has imposed 60% tariffs on Chinese goods and 10-20% tariffs on all goods exported to the United States from other countries. Because otherwise, American enterprises will not make profits if they want to develop manufacturing industry – enterprises in many countries will inevitably do “entrepot trade” with China secretly, and even the governments of those countries will help their own enterprises to cover up.
How many countries do you think the United States will offend by imposing 10-20% tariffs on all countries? How many countries will you offend if the United States threatens other countries not to engage in China’s transit trade?
So, we saw a news: the EU is ready to compromise with China!
According to Reuters on the 23rd, Bernd Lang, the President of the International Trade Committee of the European Parliament, revealed in an interview with German news television that “the EU and China are approaching a solution to lift the tariffs on imported electric vehicles imposed on China

Why did the EU cancel tariffs on electric vehicles? What kind of price will China have to pay?
I can clearly say that in this negotiation, we will definitely make very few concessions. I estimate that the bargaining chip we offer is that China will appropriately reduce tariffs on EU fuel vehicle exports to China.
As we all know, European fuel cars are quite powerful. In the past, China imposed high tariffs on European cars to protect the Chinese fuel car market, so the prices of European fuel cars in China were relatively high. China imposed a 25% tariff on imported large displacement fuel cars, mainly targeting luxury car companies in the European Union such as Porsche, Mercedes Benz, BMW and other brands.
After we lower some tariffs on EU fuel vehicles, prices will decrease, and some people will buy luxury fuel vehicles from the EU – some people are “cheap bones”, even if domestic production is good, they still worship foreign things; Of course, there are also some people who have been driving European cars before and are accustomed to their appearance and operating system. After China lowered tariffs, the prices of those cars decreased, and they would switch to a new European fuel powered car.
After we lower the tariffs on European fuel vehicles, European fuel vehicle companies can survive for a while longer – this may not be a good thing for Europe. Fuel vehicles still have profits, so they have no incentive to increase investment in electric vehicles, which are the future.
The EU has lifted tariffs on our electric vehicles, and we will appropriately reduce tariffs on EU fuel vehicles. This is the main content of the EU China agreement that I predict – here we suggest that everyone should not buy EU fuel vehicles. If you want to switch to a new vehicle, you should still buy domestically produced electric vehicles, which have a high cost-effectiveness ratio.
If there is no Donald Trump, I believe that the EU will not easily cancel the tariffs imposed on China’s electric vehicles – Donald Trump will certainly engage in Europe after he takes office. If China launches a trade war against the EU at this time, do you think the EU still has a way to go?
There are four main types of countries in the world:
Firstly, an agricultural country. This is represented by countries such as Argentina and Brazil.
Secondly, resource and energy oriented countries. This is represented by countries such as Saudi Arabia.
Thirdly, high-end manufacturing countries. This is represented by countries such as Europe, America, Japan, and South Korea.
Fourth, middle and low-end manufacturing countries. This is represented by countries such as Vietnam and the Philippines.
In addition, there is also a China that balances mid to low end manufacturing with high-end manufacturing, and the development momentum of high-end manufacturing is very strong.
If the United States launches a trade war against China, China will inevitably retaliate, and the most important means of retaliation is certainly to impose tariffs on American agricultural products. In this way, many agricultural countries will benefit from it, and they will inevitably increase cooperation with China – we buy their agricultural products, they buy our low-end and high-end manufacturing;
In order to develop its manufacturing industry, the United States inevitably needs to develop resources such as oil, natural gas, and coal on a large scale. As a result, many countries have overcapacity in oil, coal, and other resources. At this time, they also hope that China can increase its purchases from these countries – we buy their resources and energy, and they buy our low-end and high-end manufacturing;
When the United States launches a trade war against the world, many countries that focus on mid to low end manufacturing will encounter difficulties in exporting. At this time, they will inevitably demand help from China – in this case, we can demand that they purchase our high-end manufactured goods, such as electric vehicles;
……
So, a trade war is not a big deal.