China strikes back with tariffs on $60 billion of U.S. goods

Gladys Abbott
September 19, 2018

China says it has no choice but to retaliate to U.S. President Donald Trump's 10 percent tariffs on $200 billion in Chinese goods, risking a further escalation of trade tensions between the world's two biggest economies.

The new 10% tariffs will take effect on September 24 and rise to 25% by the end of 2018.

China has chose to levy tariffs on about $60 billion worth of imports from the U.S. if Washington carries out its planned tariffs on $200 billion worth of Chinese goods, China's Customs Tariff Commission (CCTC) of the State Council or the central cabinet said on Tuesday night.

While Trump says the tariffs will mean "a lot of money coming in to the coffers of the United States" they are really a tax on USA companies and consumers.

Beijing has warned that it would hit an additional $60 billion in American goods if Trump ordered more tariffs.

The lower Chinese figure highlights Beijing's inability to match the United States dollar-for-dollar in a tariffs war.

Trump also has complained about America's massive trade deficit - $336 billion a year ago - with China, its biggest trading partner.

The announcement followed a warning by an American business group that a "downward spiral" in their conflict appeared certain following Trump's penalties on $200 billion of Chinese goods. Chinese Ministry of Commerce signalled that with the new round of tariffs, a fresh round of trade talks with the USA was now uncertain. And in a victory for Apple Inc. and its American customers, the administration removed smart watches and some other consumer electronics products from the list of goods to be targeted by the new tariffs.

China is reviewing plans to send a delegation to Washington for trade talks, the South China Morning Post reported on Tuesday, citing a government source in Beijing.

This will allow United States companies some time to adjust their supply chains to alternate countries, a senior administration official said.

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"The US insists on increasing tariffs, which brings new uncertainty to the consultations between the two sides". 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. His promise to end what he says are grossly skewed Chinese trade relations was a key plank of his election.

The White House has said it's prepared to impose tariffs on another $267 billion in Chinese imports upon China's retaliation. The administration is targeting a variety of products - from sockeye salmon to bamboo mats - forcing USA companies to scramble for suppliers outside China, absorb the import taxes or pass along the burden to their customers.

A senior Chinese securities market official said USA trade actions will not work as China has ample fiscal and monetary policy tools to cope with the impact. It has weakened by about 6.0 percent since mid-June, offsetting the 10 percent tariff rate by a considerable margin.

Trump's latest escalation of tariffs on China comes after several rounds of talks yielded no progress.

It's the latest move in Trump's push against "unfair" trade policies, which economists fear will prove counterproductive.

One precondition for the talks was that the Americans would show sufficient goodwill but Trump's latest decision to escalate the trade war by slapping new tariffs on nearly half of all Chinese exports may have scuppered the talks, it quoted the sources as saying.

"But, so far, China has been unwilling to change its practices", including theft and forced transfer of technology.

In terms of the economy, President Trump has arguably tried to limit the damage to the United States by excluding some products and starting the tariff at 10%, but this will still put up costs that may well be passed onto consumers.

Overall prices for furniture are likely to increase 2% to 4%, according to a NRF report, as manufactures eat part of the new tax and pass part on to consumers.

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