China hits back by levying tariffs on US$60b of US goods

Frederick Owens
September 18, 2018

Overnight, president Donald Trump announced a new 10% tariff of $200bn on Chinese goods arriving in the U.S. from next week. Mark Vena, an analyst with technology research firm Moor Insights & Strategy, told the Wall Street Journal today that Apple has the inventory of key components for products, like the iPhone, to get through the holiday but the threats of retaliation by China "could be a serious problem" later on.

The White House has sought to pressure Beijing to reduce its trade surplus with the US and protect intellectual property rights of American companies, which it says are abused in China.

Trump's top economic advisor, Larry Kudlow, said in NY on Monday: "We stand ready to negotiate with China any time if they are willing to move towards serious talks to remedy trade problems". If the president imposes tariffs on an additional $267 billion in goods, that would be a significant escalation.

He also warned that if China retaliated then the USA would "immediately pursue phase three" which would mean imposing further tariffs with taxes on another $267bn worth of Chinese products.

The European Union's trade chief says U.S. President Donald Trump's decision to raise tariffs on $200 billion of Chinese imports is "very unfortunate" and that the EU disagrees with the methods he's using.

Mr Trump said: "For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies".

In May, in fact, it looked briefly as if Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He had brokered a truce built around Chinese promises to buy enough American farm products and liquefied natural gas to put a dent in the trade deficit. And in a victory for Apple Inc., the administration removed smart watches and some other consumer electronics products. As counterintuitive as it might seem, the president sees this fact as ultimately helping USA workers.

The tariffs will start at 10 percent, beginning September 24, and then rise to 25 percent on January 1.

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The message will be especially poignant to Canada, with which the now engaged in a trade stand-off, and Europe, a heavy bearer of steep steel and aluminum tariffs introduced earlier in the year by the president.

In the minutes of its recent meeting, the Reserve Bank board cited the US-China trade war and said there were "significant tensions around global trade policy and that this represented a material risk to the outlook".

Trump said China had refused to change the unfair practices that hurt United States businesses and workers.

China also announced that it was lodging a new complaint at the World Trade Organization in its tariffs battle with the United States. We remain open to negotiations.

By expanding the list to $200 billion worth of Chinese imports, Trump risks spreading the pain to ordinary Americans.

The administration's proposal for the tariffs on $200 billion of products drew protest from technology companies earlier this year, but the final list of taxed devices described by the official avoids many big consumer brand names and products.

The result could be higher prices for American consumers, because most companies are expected to pass on the cost to their customers. "More generally, the direction of global trade policy in the United States continued to be a source of uncertainty for the outlook for the world economy".

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