Trade Expert Predicts What’s Next in U.S.-China Trade Dispute

As the world awaits President Donald Trump’s decision on the implementation of a proposed $200 billion in additional tariffs on Chinese goods, a trade expert from the Cato Institute think tank predicts the President’s administration will break up the tariffs into batches.

“Remember the previous stage when they authorized $50 billion worth of imports: They started with $34 billion and later they added another $16 billion. So here, let’s say they authorize tariffs on $200 billion of imports, maybe they’ll start with $20 billion,” said Simon Lester, associate director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.

Lester added for CNBC’s “Squawk Box” that the Trump administration is “slowly ratcheting this up” so more tariffs are likely to follow in the future.

If imposed, the proposed tariffs would most certainly put additional strain on the already frail trade relations between the world’s two largest economies, China and the United States which have been negotiating a resolution with little success.

The U.S. has so far levied tariffs on $50 billion of Chinese goods which have all been met with retaliatory measures by Beijing.

Last week, it was reported that Washington was planning to implement a new batch of tariffs worth $200 billion and China quickly vowed to retaliate with its own tariffs on about $60 billion worth of U.S. goods.

“My sense is that, until there’s some hiccup in the U.S. economy, the Trump administration believes its strategy is working and they’re going to stick with it,” said Lester, adding that although there is undeniable evidence that U.S. companies are caught in the trade conflict, no effect has been demonstrated in U.S. economic data because “the amount of trade affected so far is actually somewhat small in terms of the overall U.S. economy.”

The expert further noted that third-quarter economic data in the U.S. could show some dent, but stressed that it’s hard to pinpoint a specific prediction because “we’re all learning…what the impact of these tariffs is.”

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