The escalating US-China trade war entered a new phase with US President Donald Trump on Monday announcing new tariffs on an additional USD 200 billion worth of imports from China.
These will apply to almost 6,000 items, marking the biggest round of US tariffs so far. With Monday’s announcement, roughly half of the $505 billion in goods that Americans buy annually from Chinese firms will face new import levies and consumers will have to shell out more for these goods.
Starting Sept 24, American importers will pay an extra 10 percent tariff for the affected items, rising to 25 percent at the end of the year, according to senior administration officials, who briefed reporters.
Trump, accusing China of refusing to change its unfair trade practices, said the new additional tariff structure would be effective September 24 from when it would be at 10 percent until the year end, but would increase to 25 per cent level from January 1.
This latest round marks the third set of tariffs put into motion so far this year. In July, the White House increased charges on $34bn worth of Chinese products. Then last month, the escalating trade war moved up a gear when the US brought in a 25% tax on a second wave of goods worth $16bn.
After the latest round, around half of all Chinese imports to the US are now subject to the new duties. It is also the biggest set of tariffs to date, and unlike the earlier rounds this latest list targets consumer goods, such as luggage and furniture.
That means regular households may start to feel the impact from higher prices. US companies have already said they are worried about the effect of higher costs on their businesses and warned of the risk of job cuts.
Unlike the $50 billion in Chinese products that Trump hit in the first tariff wave in July, which fell mainly on industrial goods, Monday’s action will affect consumer products such as air conditioners, spark plugs, furniture and lamps.
Officials have said they want to shield consumer goods from the taxes as much as possible.
But Monday’s action will affect consumer products such as air conditioners, spark plugs, furniture and many everyday items such as suitcases, handbags, toilet paper and wool. The list also includes several food items from frozen cuts of meat, to almost all types of fish from smoked mackerel to scallops and soybeans, various types of fruit and cereal and rice.
Products that help computer networks operate, such as routers, are also targeted.
The list slated for tariffs originally included more than 6,000 items, but US officials later removed about 300 types of items, including smart watches, bicycle helmets, play pens, high chairs and baby car seats.
The changes come after fierce opposition from companies, including global tech giants such as Apple, Dell and Hewlett Packard Enterprise. The US trade representative’s office received roughly 6,000 written comments when Trump first proposed the new tariffs, most opposing them.
The firms complained the tariffs would make their products more expensive, since many of their products are manufactured in China, costing them sales.
So far, however, the US economy has shrugged off the president’s trade war. While individual companies have complained about their operations being disrupted by material shortages or cost increases, growth remains strong and unemployment is approaching a half-century low.
Excluding fuel, import prices rose just 1.3 percent over the past year, according to the Bureau of Labor Statistics.
But uncertainty over trade policy remains unusually high. While economists generally estimate that the tariffs will have little impact on the overall US economy, they have warned that the effects are difficult to predict.
Trump has long been fiercely critical of China, accusing it during the 2016 campaign of “the rape” of the American economy and vowing to create a more balanced trade pattern. Yet despite months of tariff talk, the gap between what the US buys from China and what it sells there continues to widen.
Through July, the US ran a $233.5 billion trade deficit in goods trade with China, an 8 percent increase compared with the same period in 2017.
China has vowed to retaliate for the latest US tariffs with new import taxes on $60 billion in American products. If that happens, the president said, he would immediately begin the process of approving tariffs on a further $267 billion in Chinese imports – effectively taxing everything Americans buy from China.
“… if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately USD 267 billion of additional imports,” Trump said in a strong warning to China.
The US action came even as Chinese officials weighed an invitation to visit Washington for new talks aimed at ending the months-old dispute. “The Trump administration is yet again sending a perplexing mixed message by inviting Chinese officials for negotiations and then imposing additional tariffs in the run-up to the talks,” said media reports quoting Eswar Prasad, former head of the International Monetary Fund’s China division. “It is difficult to see what the administration’s vision of an end game might be other than total capitulation by China to all US demands.”
Trump said his administration is taking this action as a result of the Section 301 process that the USTR has been pursuing for more than 12 months. US Trade Representatives (USTR) released a list of such items.
After a thorough study, the USTR concluded that China is engaged in numerous unfair policies and practices relating to US technology and intellectual property – such as forcing United States companies to transfer technology to Chinese counterparts, he said.
These practices plainly constitute a grave threat to the long-term health and prosperity of the US economy, he added.
“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies. We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly,” he said.
“But, so far, China has been unwilling to change its practices,” he said. To counter China’s unfair practices, he had announced on June 15 that the US would impose tariffs of 25 percent on USD 50 billion worth of Chinese imports.
“China, however, still refuses to change its practices – and indeed recently imposed new tariffs in an effort to hurt the United States economy,” Trump said.
China, he said, has had many opportunities to fully address US concerns. “I urge China’s leaders to take swift action to end their country’s unfair trade practices. Hopefully, this trade situation will be resolved, in the end, by myself and President Xi of China, for whom I have great respect and affection,” Trump said.
Later a senior administration official told reporters that China has had many opportunities to change those practices and, in fact, the statute says that trade representatives shall take all appropriate and feasible action in an effort to obtain the elimination of those practices.
“So we’ve negotiated and negotiated and negotiated and given them chance after chance after chance… The administration has imposed tariffs on roughly USD 50 billion worth of Chinese imports already, in an effort to encourage China to alter its behaviour,” the official said.
By imposing such a tariff, the official said, the US is not trying to constrain China’s growth.
“We have no problem with China trying to grow its economy, trying to lift its people out of poverty, that’s a good thing. But, in doing so, they can’t take actions that deliberately discriminate against other countries; actions that hurt American workers. And they can’t take actions that entirely flout the rules of the international trading system,” the official said.
“This is an effort to work with China and say, it’s time that you address these unfair trading practices that we have identified, that others have identified, and which have harmed the entire global trading system,” the official asserted.
At the same time, the official said, the US remains open to negotiations. “We don’t have anything to announce to you today, in terms of any of the logistics of that, but, as the President has said, we are open to that and we hope that China will come to the table and address the concerns that we have raised,” the official said.
House Ways and Means Committee Chairman Kevin Brady said Trump is clearly increasing the pressure on China to come to the table and begin a new trading relationship that is fairer to the American farmers, workers and businesses.
“The sooner President Xi and President Donald Trump meet to craft a new trade path forward, the better,” he said.
“There is no disagreement between the Congress and the President that we must hold China accountable for hurting the US companies and workers on a colossal scale by extorting our companies to transfer their best technology, stealing our intellectual property, and shoring up China’s state-run companies through subsidies and other distortive practices,” Brady said.
“Any time tariffs are imposed, I worry that Americans will be forced to pay extra costs – in this case on nearly half of the US imports from China,” he said.