Published: Sat, July 07, 2018
Business | By Eloise Houston

Trump Tariffs Against China Take Effect

Trump Tariffs Against China Take Effect

United States tariffs on $34bn (£25.7bn) of Chinese goods came into effect on Friday. Another $16 billion of goods could follow in two weeks, Trump earlier told reporters, before suggesting the final total could eventually reach $550 billion, a figure that exceeds all of US goods imports from China in 2017.

"In a gaggle aboard Air Force One Thursday, Trump all but confirmed that he was following through with his threats, ticking through the additional tariffs he planned to levy after the initial salvo kicked in: ".

Trump's comments appeared to increase the stakes for potential retaliation by China.

After that, the hostilities could intensify: Trump said the ready to target an additional $200 billion in Chinese imports - and then $300 billion more - if Beijing refuses to yield to US demands and continues to retaliate.

An official at a company in Shanghai that handles customs clearance for importers said to Reuters that the port of Shanghai is said to have put on hold clearing some U.S. imports through customs. But the risk is that a spiraling conflict undermines economic growth by gumming up global supply chains and inflicting higher prices on companies and consumers. The Federal Reserve has already noted some firms are slowing investment, while Harley-Davidson and General Motors are warning they may cut jobs.

USA equities marched higher after monthly jobs data showing a 213,000 gain in non-farm payrolls in June and stable wage growth.

Asked whether US companies would be targeted with "qualitative measures" in China in a trade war, Gao said the government would protect the legal rights of all foreign companies in the country. "There is no obvious end to this". That conjures the image of this being a cool, calm, collected game of chess on both sides: Washington and Beijing.

That could include "a wide range of products as diverse as tool sets, batteries, remote controls, flash drives and thermostats", he said, adding, "a strategy based on unilateral tariffs is the wrong approach, and it has to stop".

Economists have warned that the escalating trade frictions could throttle global growth.

Ahead of the tariffs, Chinese state media published a series of editorials criticising the USA and emphasising the country's readiness for a trade war. "No one will emerge as a victor from trade war, it benefits no one".

That's an unusual move for this time of the year, when China usually starts booking US supply in the months before the North American harvest starts.

Retaliatory measures "took effect immediately", Chinese Ministry of Foreign Affairs spokesman Lu Kang (陸慷) said. He had spoken to customs officials.

China's tariffs on USA goods came into effect immediately afterward, a spokesman for the Chinese Foreign Ministry said Friday.

Much of this was from states that had narrowly supported Trump in 2016's presidential election.

This is a very targeted approach as the U.S. soy industry is both especially reliant on Chinese buyers given the majority ends up there, as well as key Trump supporters.

American companies doing business in China are particularly anxious.

It may be some time before the effect of the tariffs is clear. The Shanghai Composite index fell 1.1 per cent, after reaching more than a two-year low this week, while U.S. indices are expected to follow suit when they open later today. If the USA and China cool off after a first round of tariffs, the impact on their economies will be modest, according to Bloomberg Economics. Some fiber originally sold to China was redirected to Vietnam.

Perhaps the most immediate effect to U.S. citizens will be some of its farmers.

Global inflation should rise by 0.1-0.3 percentage points, not accounting for currency volatilities.

Global supply chains are now highly specialized and delicate, and disruption in one part of the production could imply a breakdown in the whole process, Hui said.

China's tariff list is heavy on agricultural goods such as soybeans, sorghum and cotton, threatening USA farmers in states that backed Trump in the 2016 US election, such as Texas and Iowa.

American Soybean Association President John Heisdorffer, a soybean producer from Keota, Iowa, emphasized the importance of the Chinese market and the investment US farmers have devoted to cultivate the Chinese market.

The US was already undermining the WTO's trade disputes process by stalling on the appointment of new judges, he said. USA suppliers rarely make these attachments, so the company must import them. And the impact would be roughly double in 2019.

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