Trade War Truce? Bank of America CEO Sees Tariff De-escalation, But China Remains a Wildcard
The era of unpredictable trade tariffs, a hallmark of the previous administration, may be cooling down. Bank of America CEO Brian Moynihan recently indicated a shift towards stability, suggesting that the initial shockwaves of President Trump’s trade policies are subsiding. But the picture isn’t entirely clear, particularly when it comes to the US-China relationship.
From Shock to Acceptance: Businesses Adjust to the New Normal
Moynihan highlighted the initial disruption caused by the sudden imposition of tariffs. “If you go back to where we were in April [2024], there was a lot of lack of understanding about where this would end up, and that affected small businesses and medium-sized businesses,” he stated on CBS News’ “Face the Nation.” Many companies were caught off guard, struggling to adjust pricing, supply chains, and investment strategies.
The initial policy saw a blanket 10% tariff on imports, escalating for specific countries and products. However, Moynihan believes a “tariff floor” is emerging. Bank of America’s internal analysis points to tariffs clustering around 15% for most nations, with higher rates reserved for those unwilling to reciprocate in trade negotiations.
“To go from a 10% across the board, to 15% for the broad base of countries, not a huge impact,” Moynihan explained. This predictability, even at a higher rate, allows businesses to plan more effectively. A recent survey by the Institute for Supply Management showed that 62% of manufacturers have now factored tariffs into their long-term cost projections, up from just 38% a year ago.
Did you know? The Peterson Institute for International Economics estimates that US tariffs cost American consumers over $80 billion annually.
China: A Different Breed of Trade Challenge
While a degree of stability is returning in trade relations with many countries, China remains a significant outlier. Moynihan emphasized that the situation with China is fundamentally different, driven by national security concerns surrounding critical resources like rare earth minerals, magnets, and the burgeoning AI sector.
“China’s a different question, because the national security interests…it’s a very different case,” he said. This suggests that tariffs on Chinese goods are likely to remain elevated, and potentially even increase, as the US seeks to reduce its reliance on Chinese supply chains. The US Department of Defense recently announced a $500 million investment in domestic rare earth mineral processing capabilities, signaling a long-term commitment to reducing dependence on China.
Beyond Tariffs: The Labor Shortage Hurdle
Interestingly, Moynihan pointed out that tariffs aren’t the biggest challenge facing smaller firms right now. Instead, the primary obstacle is finding qualified labor. “So their issue right now is, can I get the labor I need to do, to bid the contracts, to do the work I’m doing?” he stated, highlighting immigration policies as a key concern.
This aligns with data from the Bureau of Labor Statistics, which shows a persistent labor shortage across multiple sectors, particularly in manufacturing and construction. Companies are struggling to fill open positions, leading to project delays and increased costs.
Pro Tip: Businesses should proactively invest in employee training and development programs to address the skills gap and attract and retain talent.
USMCA Review and the Future of North American Trade
Moynihan also flagged the upcoming review of the US-Mexico-Canada Agreement (USMCA) as another critical factor. “The USMCA, which has to be redone, is also a different case,” he noted. The agreement is scheduled for a comprehensive review in 2026, potentially leading to renegotiations on key provisions.
This review could impact trade flows, investment patterns, and supply chain configurations across North America. Businesses operating in the region should closely monitor the developments and prepare for potential changes.
Frequently Asked Questions (FAQ)
- What is a tariff? A tariff is a tax imposed by a government on goods and services imported from other countries.
- How do tariffs affect businesses? Tariffs increase the cost of imported goods, potentially leading to higher prices for consumers and reduced profits for businesses.
- Is the US trade war with China over? While tensions have eased somewhat, a full resolution remains elusive. The US continues to maintain tariffs on a significant amount of Chinese goods.
- What is USMCA? The United States-Mexico-Canada Agreement is a free trade agreement between the three countries, replacing NAFTA.
Reader Question: “How can small businesses navigate these ongoing trade uncertainties?” The key is diversification – exploring alternative suppliers, expanding into new markets, and investing in automation to reduce reliance on imported goods.
Explore more insights on Bank of America’s insights page and stay updated on global trade developments with the World Trade Organization.
What are your thoughts on the future of trade? Share your perspective in the comments below!
