China tariffs: What's behind them, who stands to be hurt?

China warns it has no choice but to retaliate against the latest round of US tariffs but did not specify how. — Reuters pic

Trump orders new tariffs on additional USD 200 Bn worth of Chinese imports

President Donald Trump served up $200 billion in tariffs on imports from China on Monday that will go into effect nearly immediately as he launched the latest volley in the escalating trade war between the two countries. On Tuesday, Beijing threatened to "undertake synchronous retaliation" against the USA for its decision. Some will bring operations to the United States - one of Trump's goals. On Wall Street stocks closed lower led by declines in Amazon and Apple amid investor fears the companies could be caught in the middle of a China US trade war.

And how all that plays out could determine whether Trump's negotiating gamble proves a triumph or a failure.

In the first two rounds of tariffs, the Trump administration took care to try to spare American consumers from the direct impact of the import taxes. And China has retaliated in kind, hitting American soybeans, among other goods, in a shot at the president's supporters in the US farm belt.

While Trump wants U.S. companies to shift their manufacturing from China and elsewhere to the United States, not only would that make the USA companies higher cost and less competitive in worldwide markets but it could take years to build the manufacturing plants or re-engineer supply chains. But 2018 imports from China through July were up almost 9 percent over the same period of 2017, according to U.S. Census Bureau data. The list runs 194 pages.

Trump also warned that if China takes retaliatory action against US farmers and industries, the administration will pursue tariffs on about $267 billion of additional imports.

"Our concern with these tariffs is that the United States will be hardest hit, and that will result in lower U.S. growth and competitiveness and higher prices for USA consumers", Apple said in a letter. After Trump announced tariffs on washing machines toward the start of 2018, the price for laundry equipment shot up 16 percent between February and May, according to an analysis by Mark Perry, an economics professor at the Flint campus of the University of MI and a scholar at the American Enterprise Institute, a conservative think tank. But the tariffs are thought to have cost significant USA job losses.

The White House says it has made it very clear what the US expects from China regarding trade, but since the country has not complied the president slapped Beijing with more tariffs.

"Although this percentage may seem small, the tariffs will disrupt Sino-American supply chains, and may, therefore, triple the effects on world trade", ING warned. USA 30-year yields also hit a four-month peak of 3.159 percent, while 2-year yields soared to 2.799 percent, the strongest level in 10 years.

Both sides are now discussing how to pursue talks toward zero tariffs.

Many less intense trade conflicts have followed. Critics dismissed Beijing's commitments as vague, and Trump made a decision to proceed with the tariffs after all.

The announcement was on the same day of the unofficial Chinese National Humiliation Day, commemorating the events that preceded the Japanese invasion of northeastern China in 1931, which turned Manchuria into Tokyo's satellite city. "What Trump is doing is increasing the cost, and he's introducing uncertainty into trade relations".

The escalating confrontation shook up global stock markets.

U.S. Treasury yields rose across the board on growing expectations the Federal Reserve would raise interest rates in September and December, and perhaps at least twice more in 2019.

The Retail Industry Leaders Association pointed out that the new tariffs would still hit more than $1bn worth of gas grills from China, $843m worth of luggage and travel bags, $825m worth of mattresses, and $1.9bn worth of vacuum cleaners.

Latest News