Trade war: US hits China with new wave of tariffs

Trade war: US hits China with new wave of tariffs



                                 A woman shops for Chinese made shoes at a store in the Chinatown area of Los Angeles, California on August 24, 2019Image copyright                 Getty Images                                                  

The US has imposed fresh tariffs on $ 112 BN (£ 92 bn) of Chinese imported goods such as shoes, nappies and food.

The new tariffs are a sharp escalation in the bruising trade war, and could cost households $ 800 a year.

The move is the first phase of US President Donald Trump’s latest plan to place 15% duties on $ 300 bn of Chinese imports by the end of the year.

In response, Beijing introduced tariffs on US crude oil, the first time fuel has been targeted.

If fully imposed, Mr Trump’s program would mean that nearly all Chinese imports – worth about $ 550 bn – would be subj ect to punitive tariffs.

What was initially a dispute over China’s allegedly unfair trade practices is increasingly seen as a geopolitical power struggle.

So far, Washington has imposed tariffs on some $ 250 bn of Chinese goods to pressure Beijing into changing its policies on intellectual property, industrial subsidies, market access, and the forced transfers of technology to Chinese firms.

Beijing has consistently denied that it engages in unfair trade practices, and has retaliated with tariffs on $ 110 bn of US products.


How do they differ from previous tariffs?

Katie Prescott, BBC Business Reporter

It’s the American consumer who will bear the brunt of these fresh tariffs, unlike previous rounds which have hit the manufacturing sector hardest.

Nappies, dishwashers, shoes, clothes, food – looking throughthe 122 – page list of eligible products, it’s hard to find something that’s not on there.

Many retailers say they have little choice but to pass on the cost to shoppers.

The president of the American Apparel and Footwear Association, Rick Helfenbein, describing the tariffs as like “punishing your daughter for something your son did. It makes no sense “.

The next round of tariffs on more clothes and big-ticket items like laptops and iPhones are due in December . Donald Trump says this will help to protect spending during the Christmas season.

By the end of the year, they’ll be in place on almost all of the $ 550 bn of goods that the US buys every year from China.

And that could add up to $ 800 to the average household’s annual spend, according to Katheryn Russ from the University of California.


How has industry reacted?

Businesses are finding it increasingly hard to navigate the uncertainty of the long-running trade dispute.

Analysts say that in view of the latest escalation, the prospect of a resolution looks grim.

“It’s difficult at this stage to see how there can be a deal or at least a good deal,” Julian Evans -Pritchard, a senior China economist at Capital Economics, told the BBC.

“Since talks broke down back in May, the position of both sides has hardened and there have been other complications, namely the Huawei ban and Hong Kong protests, which have made it even more difficult to bridge the gap. “

The US government put Huawei on a trade blacklist in May, while President Trumphas tied protests in Hong Kong to a possible trade deal with China.

What is expected on 1 September?

TheUS is due to impose a 15% tariff on $ 300 bn worth of Chinese goods by the end of the year in two rounds.

The first round of duties comes into force from 1 September and analysts expect those tariffs will target imports worth about $ 150 BN.

                                                                                                      Image copyright                 Getty Images                                                  

The Office of the United States Trade Representative would not clarify the value of goods due to be hit with tariffs this month .

Products to be targeted in Septemberrange from meat and cheese to pens and footwear.

The 15% rate supersedes the 10% originally plannedand was announced last week as tensions between the two sides escalated.

China has retaliated with a 5% levy on crude oil, along with measures targeting $ 75 bn of US goods.

The measures included extra tariffs of 5% and 10% on nearly 1, 717 Targeted products.


Mr Trump has repeatedly argued that China pays for tariffs, but many US companies have rebutted that claim.

More than 200 footwear firms – including Nike and Converse – said the new duties would add to existing tariffs of up to 67% on some shoes, driving up costs for consumers by $ 4bn each year.

They said the incoming tariffs on footwear would “also mean these massive tax increases hit tens of millions of Americans when they purchase shoes during the holiday season “.

The American Chamber of Commerce in China also voiced concerns after theUS said it was going ahead with new tariffs.

“Our members have long been clear that tariffs are paid by consumers and harm business,”it said in a statement.

“We urge … that both sides work towards a sustainable agreement as soon as possible that resolves the fundamental, structural issues foreign businesses have long faced in China.”

What’s next?

President Trump has said that trade teams from the US and China are continuing to talk and will meet in September, but further details have not been publicly confirmed.

From 15 December, the second phase of 15% tariffs will be rolled out on the remainder of Chinese good not previously affected.

This includes technology like phones and computers which President Trump has sought to protect until now.

On the same date, China will roll out tariffs on around 3, 000 more US products.

The Trump administration plans, in addition, to raise the rates on existing duties from (% to) % on 1 October.

Mr Evans-Pritchard from Capital Economics said this rate could increase further still.

“The tariff rate could go all the way up to 45%, “he said. “Those are the goods that do the most damage to China and the least collateral damage to the US.”

For the US and Chinese economies, analysts say the pressure created by tariffs is also building.

“The full-blown trade war, together with China’s retaliation in kind, could reduce potential US GDP growth in the short run by almost 1%, “says Gary Hufbauer of the Washington-based Peterson Institute for International Economics.

“The impact on China would be larger, as much as 5%.”

The USTR said that, until 20 September, it would be collecting public comments on the planned tariff increases to 30%.


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