Trump piles tariffs atop an economy that may have private-credit infestation

(Originally published Oct. 15 in “What in the World“) Will he? Won’t he? Trump has kept markets gyrating lately with threats to impose new tariffs on China.

After China last week imposed new restrictions on exports of rare earths, Trump threatened to slap a 100% tariff on top of those he has already imposed on imports from China. Then he backed off, posting “Don’t worry about China, it will all be fine!” Treasury Secretary Scott Bessent even said a planned meeting between Trump and Xi Jinping at a summit of Asia-Pacific Economic Cooperation members in South Korea later this month is still on.

So, the latest ructions may just be a standard opening bluff by Trump ahead of those talks. Maybe. But the trade war between the two continues to escalate notwithstanding Trump’s bluster. Trump’s charges on inbound ships owned by companies with Chinese-made vessels took effect Tuesday, whether the ships are owned by Chinese companies or not. Trump has also imposed more specific tariffs on China-made roll-on, roll-off vessels, or ro-ros, entering U.S. ports—whether they’re dropping cars off or picking them up for export. China on Friday threatened to impose levies on arriving U.S.-owned ships.

Trump has also imposed new 10% tariffs on imported lumber and 25% on some imported furniture. China accounted for about 24% of the $25.5 billion in furniture imported to the U.S. in 2024, only slightly behind Vietnam, with 25%.

The new tariffs will come on top of the 34% tariff Trump imposed on April 2 as part of his “reciprocal” tariffs, miscalculated based on an erroneous formula. That reciprocal tariff on Chinese imports has been lowered to 10% as part of a temporary truce between Trump and Beijing that is due to expire Nov. 10.

Those reciprocal tariffs are imposed on top of the 20% punitive tariff on all Chinese imports to the U.S. for China’s alleged role in U.S. imports of fentanyl. Then there’s Trump’s 50% tariff on all imported aluminum and steel, his 25% tariff on all imported cars, trucks and automotive parts, and his August 50% tariff on semi-finished copper. Those sit on a range of other product-specific tariffs that pre-date Trump’s second term, ranging from 7.5% to 100%.

All told, the effective tax on imports from China to the U.S. now stands at roughly 58%, according to calculations by the Peterson Institute for International Economics. Combined with Trump’s tariffs on the rest of the world, Trump’s tariffs have shifted $110 billion from U.S. consumers and business to the federal government since he imposed them, with another $30 billion a month moving from the private sector to a government that is still shut down over a dispute as to whether it should reduce healthcare benefits to its citizens.

The fallout from auto-parts maker First Brands’ bankruptcy and the bubble in private credit is spreading to big banks. JPMorgan wrote off $170 million in the third quarter related to the bankruptcy of auto-loan company Tricolor earlier in September. “When you see one cockroach, there are probably more, and so everyone should be forewarned of this one,” JPMorgan CEO Jamie Dimon told analysts Tuesday. Tricolor was lending to car buyers without a credit history, which made it the automotive equivalent to a subprime mortgage lender. Worse, it has been accused of fraud by one of the banks securitizing its car loans.

The International Monetary Fund reiterated its warnings on the risks to the financial system posed by the expansion of financing beyond traditional banks, saying that authorities should expand oversight of credit funds, hedge funds, and private equity. The IMF said banks in the US and Europe have a $4.5 trillion in loans to these non-bank financial institutions, representing 9% of their total loan book.