How 'glocal' banks could help importers hit by Trump tariffs

Banks that specialize in Asian trade finance could suggest options

- Andy Mukherjee

The optimism around US President Donald Trump's promise of a "total reset" in relations with Beijing is fading fast; and that's a worrying omen for US importers. For many, the urgency to look outside China for new suppliers is greater than it was during Trump 1.0.

The peak US tariff on Chinese goods during Trump's first term was 21%; it is 51% now. Besides, there was a workaround back then. A lot of Chinese-made consumer goods entered America via an exemption from tariffs for parcels below $800 in value. That cushioned the blow.

The actual drop in imports from Beijing may have been a lot lower than the 17% plunge captured in the 2019 US statistics. In the present conflict, though, even small-value items shipped from China or Hong Kong are being taxed at 54%. While that's down from the 120% tariff at the peak of trade hostility, the 12 May truce is looking wobbly, with Trump accusing Beijing of violating its terms.

If they haven't already done so, now is the time for importers to call their bankers. A certain kind of lender can be a useful ally during a trade war, as a new study by Harvard University professor Laura Alfaro, together with economists from the Federal Reserve Bank of Atlanta and International Monetary Fund, shows.