INSUBCONTINENT EXCLUSIVE:
The US and China are hours away from a new round of tariffs on each other’s goods, with no improvement in relations between the two rivals
in sight.
In a significant escalation, $200 billion of Chinese products will be subject to tariffs from 12:00 a.m
Washington time on Monday, on top of the $50 billion in goods already slapped with tariffs actions in the year.
The combined $250 billion in
products facing levies is almost half the value of imports from China last year
Meanwhile, $110 billion of goods from the US will become subject to Chinese tariffs around the same time, or about 70 percent of the value
of goods it bought from America in 2017.
China on Saturday called off trade talks with US officials that had been planned for next week amid
US State Department’s sanctions against China’s defense agency and its director on Thursday contributed to the decision, according to
people familiar with the situation
There’s a growing consensus in Beijing that substantive talks will only be possible with the Trump administration after US mid-term
elections in November, the people said.
“President Trump has an excellent relationship with President Xi and our teams have been in
frequent communication since President Trump took office,” Lindsay Walters, deputy White House press secretary, said in an emailed
“We remain open to continuing discussions with China, but China must meaningfully engage on the unfair trading practices.”
The next
$267-billion-dollar question is, will President Donald Trump follow up with additional tariffs covering that amount of Chinese goods in the
meantime, as he threatened to do if China retaliated to his $200 billion salvo
That would effectively cover all the products that the US imports from China, again ratcheting up a conflict that could undermine the global
expansion and upend the supply chains of many multinational companies.
“We don’t want to, but we probably will have no choice,” Trump
said of the tariff escalation at the Oval Office last week
“We’re making a lot of headway with China.”
Even with jitters about the escalating trade war, Trump has a record US stock market to
point to in support of his policies
“New Economic Records being set on a daily basis -- and it is not by accident!” the president said Saturday on Twitter.
The following
analysis shows in charts how the tariff war has developed and what could still be to come.
Trump’s Tariff PlansThe US products that China
has targeted for retaliation have changed over time, shifting from cars and agricultural commodities to industrial goods.
See here for full
list of all goods China will tariff
In the initial round, soybeans and most of China’s imports of US cars were hit.
In the second round,
the focus has widened and shifted more to capital goods and other imports, raising the cost for industrial companies
That’s partly because many of the goods traded in large volumes with the US were already covered by the first round, so it’s getting
harder to find things on which to impose new tariffs.
That can be seen in the number of goods affected
In round one there were 659 US imports hit with the added 25 percent tariff, while this time there are 5,207 individual items on which China
plans to impose a 5 percent or 10 percent levy.
But there are still tens of billions of dollars of US goods that haven’t been hit with
extra import taxes yet -- many in areas where China is unable to compete with western countries, such as planes, computer chips, and
pharmaceuticals.
If there’s continued escalation, what happens with those goods, which China has to import from somewhere, will be closely
Even as companies like aircraft maker Boeing Co
bank on the growing Chinese market, tariffs, or the threat of them, could cause Chinese companies and consumers to spend less on US goods
and more on substitutes from home, Japan, the European Union, or elsewhere.
Energy ImpactThere are already signs of that happening in energy
This round of tariffs will include levies on US liquefied natural gas, and that’s possibly caused one ship to change course from China to
South Korea to avoid the penalty.
In the US, companies complain that the time frame between the announcement of tariffs and their
implementation of the tariffs on thousands of products is too short to arrange alternatives
And a protracted trade war will fuel inflation in the US, particularly as tariffs are added to categories such as furniture, apparel and
technology, according to analysts at Bloomberg Intelligence.
Tidal Wave“Retailers are already facing a tidal wave of tariffs
This latest tranche is a tsunami,” said Hun Quach, vice president of international trade for the Retail Industry Leaders Association, a
trade group based in Arlington, Virginia
“With thousands of consumer products included, little warning, and no time to prepare, businesses are left scrambling.”
Commerce
Secretary Wilbur Ross told CNBC on Sept
that it was up to the Chinese whether or when the two sides will meet, and that the end goal was not to have tariffs in place but for China
to “resolve fundamental issues.”
“It’s a little disappointing that the earlier tariffs haven’t resulted in more constructive
dialogue, but we hope these will,” Ross said.
Asked about the potential for US consumers to face higher prices when tariffs kick in, Ross
said the levies are spread over such a wide range of goods that “nobody is going to actually notice it at the end of the day.”
