What impact will Trump's new tariffs on China have?


U.S. President Donald Trump escalated his trade war with China on Monday, imposing 10 percent tariffs on about $200 billion worth of Chinese imports and he warned that if China takes retaliatory action against U.S. farmers or industries, "we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports".

The new 10% tariffs will take effect on September 24 and rise to 25% by the end of 2018.

Taken together, it means roughly half of the products that China sells to the United States each year will be hit by American tariffs.

Last month, China unveiled a proposed list of tariffs on US$60 billion of USA goods ranging from liquefied natural gas to certain types of aircraft - should Washington activate the tariffs on its US$200 billion list.

So far, the USA has imposed tariffs on $50bn worth of Chinese products to pressure China to make sweeping changes to its trade, technology transfer, and hi-tech industrial subsidy policies.

On Tuesday, China announced a tariff hike on $60 billion of American products.

After a seven-week comment period, the administration announced that it had withdrawn several items from an earlier list of $200 billion in Chinese imports, including child-safety products such as bicycle helmets.

Items previously designated to be hit by 20 or 25 per cent tariffs included products ranging from liquefied natural gas and mineral ores to coffee and various types of edible oil.

"[The U.S. Trade Representative] concluded that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property-such as forcing United States companies to transfer technology to Chinese counterparts". It was unclear if the tariffs announced on Tuesday were lower to match the USA plan.

On Tuesday, China vowed to impose "counter-measures" in response to the new tariffs.

Earlier this month, Apple wrote a letter to the U.S. Trade Representative. "Hopefully, this trade situation will be resolved, in the end, by myself and President Xi of China, for whom I have great respect and affection".

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If the business case for new export terminals in the U.S.no longer look compelling because of tariffs from China, other projects around the world could receive a boost.

A U.S. senior administration official said during a press briefing on Monday that "the tariffs are having an effect on China, and so far they haven't really had much of an effect on the United States".

Trump said China was trying to use trade to undermine him with his supporters before November 6 congressional election.

He sees only a minimal impact on inflation.

Economists at UBS Group AG say even a 10 percent tariff would slow the United States economy in the fourth quarter by enough to stop the Federal Reserve hiking interest rates again in December.

Bloomberg reported that a truce is still feasible: "The Chinese government is still willing to negotiate, the country's finance ministry said on Tuesday".

Trump continues to ratchet up pressure on Beijing to change its trade practices.

President Donald Trump tweeted yesterday that tariffs have bolstered Washington's bargaining position in a trade dispute with Beijing while cost increases to American consumers have been negligible, warning of more levies as prospective trade talks with China appeared in doubt. It was not clear what statement from Beijing the president was referring to in his post. The U.S. levy is slated to rise to 25% at the end of the year.

In the first two rounds of tariffs, the Trump administration was careful to try to spare consumers from the direct impact of the import taxes.

United States companies have already said they are anxious about the effect of higher costs on their businesses.