On Friday, it was reported that Mr. Trump plans to impose 25 percent tariffs on Chinese goods. According to BBC News:
‘Tariffs that affect more than 800 products worth $34bn in annual trade are due to come into effect on 6 July.
‘The White House said it would consult on tariffs on the other $16bn of products, and would apply these later.’
Now, Chinese officials have announced retaliatory tariffs aimed at the U.S. which include electric cars, soybeans, and whiskey. According to The New York Times:
‘The Trump administration on Friday escalated a trade war between the world’s two largest economies, moving ahead with tariffs on $50 billion of Chinese goods and provoking an immediate tit-for-tat response from Beijing.’
The United States has also levied global tariffs on metal imports from Canada, Mexico, and the European Union, which threatens to tear up the North American Free Trade Agreement. The Times reported:
‘These countries are fighting back, drawing up retaliatory measures that go after products in Mr. Trump’s political base. China’s response was swift on Friday, focusing on $50 billion worth of American goods including beef, poultry, tobacco, and cars.’
These actions will likely be felt through the global economy and will cripple supply chains, which will cost jobs at American companies that will be forced to absorb higher prices. These tariffs will drive up costs for the American consumer as well as for businesses that depend on China for parts.
Things could likely worsen if the United States and China continue their tit-for-tat. The president has already promised more tariffs in response to China’s reaction. According to The Times:
‘China, in turn, is likely to back away from an agreement to buy $70 billion worth of American agricultural and energy products – a deal that was conditional on the United States lifting its threat of tariffs.’
Eswar Prasad, a professor of international trade at Cornell University said:
‘China’s proportionate and targeted tariffs on U.S. imports are meant to send a strong signal that it will not capitulate to U.S. demands.
‘It will be challenging for both sides to find a way to de-escalate these tensions.’
Featured image by Kevin Dietsch/Pool via Bloomberg