Trump May Shift to Flat Tariffs as China Boosts Gold

Post by : Bianca Suleiman

Photo: AP

Former U.S. President Donald Trump may be planning to step back from his strict tariff policies, especially the tough ones he put on China. A new report by Jefferies, a global investment firm, says that Trump might soon suggest a new idea — setting a flat 10% tariff on all goods coming into the U.S. from other countries. For Chinese products, however, the tariff might be a bit higher at 20%.

According to Jefferies, this plan could help Trump make his trade rules simpler. They believe Trump is looking for a way to change his earlier tough stance on tariffs without looking weak. The report also says that the 20% tariff on China includes a 10% tariff already in place from his first term as president.

While the U.S. has been limiting China's access to important technologies like advanced computer chips, China has been fighting back in a smart way. China controls a lot of the world's rare earth metals. These metals are important materials used to make electronic devices. China has linked its exports of these rare earths to America’s tech restrictions. This means if the U.S. limits China’s tech access, China might stop sending rare earths in return.

Jefferies says that if Trump really wants to make a deal with China, he will have to stop listening to the people in Washington who are pushing for stronger national security rules. These people want the U.S. to stay tough on China, but that could make it harder to reach any agreement.

In the meantime, China is working to make its economy stronger. One way it’s doing that is by buying more gold. In April, China increased its gold imports by 73% compared to March. That’s about 127.5 tonnes of gold — the highest amount in 11 months. This number is almost half of the gold usually produced around the world (not counting China).

Also, China’s gold exchange-traded funds (ETFs), which are used to invest in gold, have gained 82.1 tonnes of gold so far this year. That’s more than what was added during all of last year, which was 53.3 tonnes. Even though a small amount — 6.1 tonnes — was taken out in May, the increase is still strong.

In short, the report from Jefferies shows that Trump may be softening his trade approach. A flat tariff might make things simpler while still keeping some pressure on China. On the other hand, China is using smart moves like controlling rare earth exports and boosting gold reserves to stay strong. This back-and-forth between the U.S. and China shows how both countries are getting ready for important future decisions in their trade relationship.