Trump Eyes Even Higher Tariffs as Trade War With China Escalates

09 July, 2018, 19:39 | Author: Regina Silva
  • Exchange Group offices are seen in the City of London Britain

The trade war between the world's two largest economies, with possible far-reaching global effects, has begun as the United States' punitive tariffs on US$34 billion (S$46 billion) worth of Chinese goods kicked in and China retaliated with equivalent measures.

Beijing had said that China's punitive tariffs on USA products would immediately take effect after America imposed penalties on Chinese goods worth a similar amount.

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

Similarly, China is placing 25% tariffs on a host of goods including crude oil and soybeans. A trade war could disrupt these flows and even shift the location of the final manufacture, to avoid penal tariffs in the export destination.

"You saw with China, $50 billion and another $200 billion frankly is waiting", he said at the rally in Great Falls, Montana, referring to envisaged additional 10 percent tariffs on $200 billion in Chinese imports.

Forecasters say global economic growth could be reduced by up to 0.5 percentage points in 2019-20 if both sides wind up raising tariffs on $250 billion of imports.

"Trade war is never a solution", Chinese Premier Li Keqiang said at a news briefing with Bulgarian Prime Minister Boyko Borissov in Sofia before a summit with 16 central and eastern European countries.

Thus, the core of the global trading system progressively built up over the past 70 years and the global supply chains and financial system developed over recent decades to facilitate global trade and investment are under threat, along with the still-fragile recovery in the global economy from the financial crisis.

"There should be no doubting Beijing's resolve", the China Daily said. "No one will emerge as a victor from trade war, it benefits no one". The reality is that trade wars are damaging to everyone, not just the participants, and no one will "win".

The row has caused turbulence on the world's stock markets and could hurt global trade and growth.

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In response to the U.S. tariffs, Chinese Premier Li Keqiang indicated resolve on the part of the Chinese to meet any American move head-on. Asian equities wobbled but also managed to end up. China, however, is right to say that the U.S. trade deficit is fundamentally a effect of the chronic savings-investment gap of the American economy.

American growers supplied one-third of the soy that China imported previous year. The products, all sold on Chinese e-commerce platforms, ranged from pet food to mixed nuts and whiskey.

The fight could also affect other parts of China-US relations.

"Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports", Heisdorffer said in a statement. There did not appear to be any direct instructions to hold up cargoes, but some customs departments were waiting for official guidance on imposing added tariffs, the sources said.

The paper holds that the tariffs will affect several USA sectors, including technology (which Trump says he's trying to protect) while hitting multinational supply chains and firms, as well as harming foreign investment in Chinese firms by allies such as Japan, South Korea, and European Union countries.

China's resilient foreign exchange reserves means the country still had enough room for the currency to weaken in the event the trade war with the U.S. is protracted, said ING Bank's economist Iris Pang. "What we will likely see happen in the short-term is apples that were destined for export markets will instead overhang the USA market", she said.

Throughout the escalating conflict, China has sought to take the high road, positioning itself as a champion of free trade, but state media ramped-up criticism of Trump on Friday.

And Trump said Thursday that higher tariffs on an additional $16 billion of Chinese goods are coming in the next two weeks, setting up what could be a tariff on $550 billion worth of goods - more than the $506 billion in Chinese imports past year.

The U.S. goods trade deficit with China totaled $375.23 billion a year ago, almost half the U.S. trade deficit globally, according to U.S. Commerce Department data.

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