Welcome to the President's Inbox President Donald Trump's tariff hikes

and what it means for the future of U.S. China relations is Zoe Liu.

Zoe is the Marisa R. Greenberg Senior Fellow for China Studies here at the Council on Foreign Relations.

Her work focuses on international political economy, global financial markets, in critical mineral

supply chains. She recently brought a piece for foreign affairs titled How China Armed

Itself for the Trade War. Zoe, thank you for coming back on the president's inbox.

Thank you, Jim, for having me. It's always a great honor and the pleasure.

So, Zoe, U.S. tariffs on most Chinese goods now stand at 145%. There are some exemptions,

at least for now, on smartphones, computer semiconductors, and some auto imports. China, meanwhile, has imposed tariffs of

125% on most U.S. goods, with exemptions for some pharmaceutical semiconductors and airplane parts.

What's the economic significance of the tariffs, Zoe, especially given that the United States remains China's largest trading partner?

Well, China is the United States' third largest trading partner.

Jim, if I can take a step back by pointing out some numbers.

Okay.

Since 2018 to now, the United States and China, in fact, I'd argue, has been engaging in a

low-level trade war. It's just that during the Biden administration, there was not a

tick for tat back in force, but now we are back on again. And since then, the U.S. share of

Chinese export has declined from 18% to 15%. Now, this is to say that a direct trade between

the United States and China has declined, but that does not include trade diversion through countries like Vietnam, Morocco, or Mexico.

Explain for me briefly what trade diversion means. So it means Chinese companies for reasons such as

fierce domestic competition, they want to sell overseas, and for reasons that they want to

find places that they can

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