The U.S.-China Trade War is About to Get Real

After months of threats and skirmishes, the trade war between the United States and China is about to get serious. The United States is “opening fire” on the world with its threatened tariffs, China warned on Thursday, saying no one wants a trade war but it will respond the instant U.S. measures go into effect as Beijing ramped up the rhetoric in the heated dispute, Reuters reports.

Beijing denies it’s in the wrong and says it’s ready to fight a trade war until the end.

“The United States will be opening fire on the whole world and also opening fire on itself,” Chinese Commerce Ministry spokesman Gao Feng told reporters on Thursday. He warned that the US tariffs will hurt foreign companies that export goods from China to the United States.

The Trump administration’s tariffs on $34 billion of Chinese imports are due to go into effect at 0401 GMT on Friday, which is just after midday in Beijing. U.S. President Donald Trump has threatened to escalate the trade conflict with tariffs on as much as $450 billion worth of Chinese goods if China retaliates, with the row roiling financial markets including stocks, currencies and the global trade of commodities from soybeans to coal.

China has said it will not “fire the first shot”, but its customs agency made clear on Thursday that Chinese tariffs on U.S. goods would take effect immediately after U.S. duties on Chinese goods kick in, CNN Money adds. The U.S. tariffs on China that take effect Friday target more than 800 different items, including industrial machinery, medical devices and auto parts. Beijing plans to fire back by hitting 545 American products such as SUVs, meat and seafood.

“The U.S. measures are expected to take effect first, shortly after midnight ET on Friday. That’s around midday in Beijing, and the Chinese government will wait until then to retaliate, as it “will never fire the first shot but will be forced to strike back,” Gao said.

The United States is also set to go ahead with tariffs on another $16 billion in Chinese exports later in the summer, and China has vowed to retaliate against US goods of equal value. Economists say that if the tariffs stop there, the impact on both economies will be small. But Trump has said his administration will respond to retaliation from Beijing with tariffs on as much as $400 billion of Chinese goods, raising the prospect of worsening tit-for-tat reprisals. For the time being, analysts say it’s hard to see either side backing down.

“By threatening unilateral action without having any allies and not reducing domestic discord on trade, the Trump administration has invited China to stand tough. The Trump administration also believes that at least starting a trade war is in its interests; the US economy is strong enough to endure a crimp in trade, the President’s domestic political standing is as strong as ever amongst Republicans, and pushing China hard on trade may help restore U.S. credibility on other issues,” said Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies.

And just like that, a high-risk trade war between the world’s two biggest economies will begin — one that could quickly escalate, according to CBS News.

“I see us running into a full collision course in a few days,” said Ashley Craig, a trade lawyer at law firm Venable LLP. “It seems as if both sides are fairly dug in.”

China has warned that it won’t yield to Trump’s pressure. If the U.S. starts taxing Chinese imports Friday, Beijing plans to impose 25 percent tariffs on 545 U.S. products worth $34 billion a year — from soybeans and lobsters to sport-utility vehicles and whiskey. China is considering a follow-up tariff on an additional 114 U.S. goods, worth $16 billion a year. Beijing’s target list of U.S. goods to penalize is heavy on agriculture. That’s hardly a coincidence. Its tariffs are meant to deliver pain to American farmers, who overwhelmingly backed Trump in the 2016 election and whose interests are represented by powerful lobbyists and members of Congress.

In the meantime, Trump has told his U.S. trade representative, Robert Lighthizer, to identify an additional $200 billion in Chinese goods for 10 percent tariffs. These penalties would take effect, Trump has said, if Beijing fails to reform its trade practices and proceeds with retaliatory tariffs. The stakes could rise further yet: Trump has threatened tariffs on still another $200 billion in Chinese products if Beijing continues to retaliate.

The initial fusillade of tariffs will likely do little damage to the United States, China or the global economy. But if they escalate, the pain will deepen and spread. Economists at Bank of America Merrill Lynch have warned that a full-fledged trade war, especially one that lasts more than a year, would slow the U.S. economy. By disrupting supply chains, eroding business confidence and heightening uncertainty; a trade war, they say, could “push the economy toward full-blown recession” and jeopardize America’s economic expansion — the second-longest on record.

What’s more, the U.S. tariffs on imported Chinese products could end up hurting American manufacturers. The Peterson Institute for International Economics calculates that 85 percent of the Chinese products to be hit by the initial Trump tariffs are machinery and components used in finished goods made in the United States. A result is that U.S. manufacturers will have to pay more for parts and equipment, thereby putting them at a competitive disadvantage to foreign rivals.

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