Trump kicked the trade war with China into high gear

  • President Donald Trump’s administration has released a list of $US200 billion worth of Chinese exports to the US that could be subject to a new 10% tariffs.
  • A tariff on $US200 billion worth of Chinese goods would be a massive escalation of Trump’s trade war with China.

The Trump administration has released a gargantuan list of Chinese goods that will be subject to tariffs, kicking a burgeoning trade war into high gear.

The new 10% tariffs will apply to a huge amount of items including seafood and other fresh goods, according to the list released by US Trade Representative Robert Lighthizer.

“As a result of China’s retaliation [the introduction of tariffs on $US34 billion worth of US imports] and failure to change its practices, the President has ordered the US Trade Representative (USTR) to begin the process of imposing tariffs of 10% on an additional $US200 billion of Chinese imports,” Lighthizer said.

The tariffs are in addition to Trump’s 25% tariffs on $US50 billion worth of Chinese goods. Tariffs on the first $US34 billion worth of goods went into place on Friday. The second round, which will apply to around $US16 billion worth of Chinese goods, is set to be imposed in the coming weeks. That second round will be derived from a list already released by the US Trade Representative.

The release of the $US200 billion list is perhaps the most concrete step yet toward an all-out trade war with China and triggers a formal process to implement the tariffs. The next step will be a comment period, during which businesses and consumers can raise issues with the inclusion of certain goods on the list.

“This is an appropriate response under the authority of Section 301 to obtain the elimination of China’s harmful industrial policies,” Lighthizer said in his statement. “USTR will proceed with a transparent and comprehensive public notice and comment process prior to the imposition of final tariffs, as we have for previous tariffs.”

The developments mean roughly half of all Chinese imports to the US will be subject to increased duties.

The move was immediately attacked by industry groups and trade experts who warned that the back-and-forth tariffs will increase costs for consumers and discourage investment by businesses into new hiring and equipment. These decisions in turn will slow down the US economy.

David French, the senior vice president for government relations at the National Retail Federation, said that the majority of the pain from the new tariffs would fall on US consumers and families.

“The latest list of $US200 billion of products to be subject to tariffs against China doubles down on a reckless strategy that will boomerang back to harm US families and workers,” French said. “The threat to the U.S. economy is less about a question of ‘if’ and more about ‘when’ and ‘how bad.'”

Jay Timmons, the president and CEO of the National Association of Manufacturers (NAM), also expressed displeasure with Trump’s announcement.

“The last thing America’s manufacturing workers need is an escalating trade war,” Timmons said in a statement. “America has China’s attention, so instead of more tariffs, the US and China should immediately begin working toward a fair, bilateral, enforceable, rules-based trade agreement to end China’s market-distorting activities.”

Even members of Trump’s own party slammed the administration’s announcement.

“Although I have supported the administration’s targeted efforts to combat China’s technology transfer regime, tonight’s announcement appears reckless and is not a targeted approach,” GOP Sen. Orrin Hatch, chair of the Senate Finance Committee said in a statement. “We cannot turn a blind eye to China’s mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy.”

Trump has warned that if the Chinese decide to counter the tariffs on $US200 billion worth of goods, a fourth round of restrictions will hit another $US200 billion worth of Chinese goods. In the event all threats are realised, Trump will have hit just over 80% of all Chinese exports to the US with tariffs.

A short time ago, China’s Ministry of Commerce said it would retaliate in response, and suggested the latest round of US tariffs would hurt China, the world and the United States.

It promised to immediately file a complaint to the World Trade Organisation (WTO) and called upon the world to oppose bullying and safeguard free trade. On Friday, the Commerce Ministry said Trump had started the “largest trade war in economic history.”

Analysts from UBS said the possibility that US tariffs could extend into the hundreds of billions is now firmly in play.

“Once the administration implements the additional $US200 billion in tariffs, the Chinese government will almost surely retaliate,” UBS said.

“On this path, the US government would then almost surely retaliate in response, raising the stakes immediately to $US450 billion in imports of Chinese goods under tariff.” UBS said that at that point, a damaging economic fallout would be almost inevitable.

The analysts said a positive outcome is still possible, but it will rely on both sides coming to an agreement over the US complaint about China’s intellectual property practices – a dispute which forms the basis of the current US tariffs that are in place.

Following the release of the news, markets around the world were in flux. US stock futures tanked, while the Chinese yuan also weakened against greenback and the Shanghai Composite stock index was down 1.87% into the midday lunch break.