Monday, 19 November, 2018

Sizing up the worldwide and domestic impact of China tariffs

Donald Trump Source Shutterstock
Jodi Jackson | 06 July, 2018, 00:44

President Donald Trump's tariffs on Chinese products are set to officially kick off, escalating the growing trade war between the U.S. and China.

"However, if the Untied States adopts taxation measures, China will be forced to fight back to defend the core interests of the nation and the interests of the people", Commerce Ministry spokesman Gao Feng said, according to USA Today.

Economists have for months warned of the potential damage to the U.S. and global economies from aggressive trade policies that evolve into protectionism, which would raise prices and upend global supply chains.

Countries are ranked by how integrated they are into the global value chain. "To put it simply, the United States is opening fire on the entire world, including itself".

The United States is "opening fire" on the world with its threatened tariffs, the Chinese government warned on Thursday, saying Beijing will respond the instant USA measures go into effect as the two locked horns in a bitter trade war.

Trump has threatened to progressively ratchet up USA penalties to a total of $450 billion in goods - which would represent the lion´s share of all of China´s exports to the United States.

On Friday, the world's top two economies are due to exchange fire by hitting $34 billion of each other's exports with steep new tariffs, the first moves in what may become a devastating cycle of retaliation. According to Bloomberg, President Trump will cut as much as half a percentage point from staggering growth levels of around 6.9 percent.

In addition to the first tranche of tariffs going into effect Friday and the second coming in weeks, Trump has continued to threaten more action against China unless the country shrinks its trade imbalance with the US.

Despite the escalating rhetoric and explosive tweets, Senate Minority Leader Chuck Schumer, a Democrat, attacked Presdient Trump last week for not being tougher on China.

China responded by threatening tariffs on $50 billion worth of United States exports to China, mostly aimed at agricultural goods.

Investors watching the trade tit-for-tat between the United States and China may well have reason to fear the havoc a full blown conflict between the world's two biggest economies could wreak on the global economy.

China is expected to retaliate with tariffs on $34 billion of U.S. goods, including soya beans.

For instance, Trump announced that the U.S. would expand the use of the Committee on Foreign Investment in the United States, which could limit Chinese investment in USA companies.

Some prominent Chinese experts say Beijing may have miscalculated the pain the USA tariffs could inflict on export manufacturers' already razor-thin margins, and overplayed its hand.

Under the banner of his "America First" policy, Trump has also targeted other traditional trade partners of the United States, such as Canada, the European Union, Japan and Mexico.

Still, a trade war would likely distract from China's efforts to expand its diplomatic, economic and military footprints overseas, notably through Xi's signature "Belt and Road" involving $1 trillion in investments in infrastructure projects across Asia and beyond.

This set off furious negotiations, which eventually resulted in a tentative trade agreement between the Trump administration and Chinese officials. US firms in China are already reporting spikes in random inspections at ports.

Ford said it encouraged Washington and Beijing to resolve their issues over trade and that it would "continue to monitor the situation as it evolves".

Both Chinese and U.S. business sources in China said there appeared to be little hope that the tariffs could be averted.

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