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U.S. China Trade War Enters New Phase With Imposition of Tariffs on Consumer Goods

Posted September 02, 2019

The Trump administration’s escalating trade war with Beijing entered a new phase on Sunday morning as 15% tariffs on about $110 billion of Chinese imports took effect.

The sweeping import duty hit a wide range of consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch.

President Trump delayed a portion of the levies in order to blunt the impact on holiday shopping, meaning that a separate category of about $160 billion in Chinese goods — including laptops and cellphones — will be subject to the 15% tariffs on December 15. By then, roughly 99% of made-in-China consumer goods imported to the U.S. will be taxed, according calculations by the Peterson Institute for International Economics.

China Hits Back
 

In retaliation, China triggered its previously threatened countermeasure; imposition of additional tariffs ranging from 5% to 10% on a portion of $75 billion U.S. goods, with the second phase of taxes due to take effect Dec. 15. Goods covered include key American farm exports such as soybeans, pork, beef, chicken, wheat, sorghum, and cotton, along with other products such as crude oil and certain vehicles.


 

U.S. Consumers to Feel the Pinch
 

The new tariffs imposed over the weekend represent “a turning point in the trade war” with the U.S., according to an editorial in the Global Times yesterday that blasted the Trump administration for “shooting Americans in the foot.” Noting the tariffs are “likely to directly raise prices for a lot of household budget items,” the Communist Party tabloid claimed it showed that Washington is almost at the end of its wits and “would rather damage itself now in an attempt to make China surrender.”

While tariffs levied by the Trump administration to date against a range of mainly industrial inputs have raised costs for businesses with trans-Pacific supply chains, these had not generally passed along onto to consumers. The new levies, however, will hit “final goods” such as toys, electronics, shoes and clothing, and are expected to show up in household costs this autumn. In a recent note to clients, JPMorgan Chase & Co. has estimated the tariffs could end up costing the average American household $1,000 a year.

The Administration’s Outlook
 

Dismissing concerns about a protracted trade war and the effects it may be having on the economy, Trump framed the tariffs as putting Washington “in an incredible negotiating position” with Beijing. “It’s only going to get worse for China,” he vowed.

The president also once again asserted that China is paying for his tariffs, tweeting that “because China has devalued their currency so much, that in fact they are actually paying for all of the tariffs we have.”

This claim is, of course, comprehensively wrong, but even if China’s presently weakening currency may have the effect of making its products somewhat less expensive in the U.S., by no means does it come anywhere close to offsetting the higher costs resulting from billions worth of new import taxes.

Trump also downplayed the effect his trade war is having on the struggling agricultural sector, claiming that the $28 billion trade compensation being paid through the USDA is “making the farmers more than whole.” Incredibly, the president even claimed that American farmers “are doing better than if China frankly were buying.” This view is, unsurprisingly, not one generally shared by American farmers, who have seen already near record-high bankruptcy filings up again from the previous year and loan delinquency rates increasing.

Next Round of Talks
 

Despite the escalation of the trade dispute, President Trump said this weekend that “as of now” the face-to-face talks scheduled to take place in Washington later this month were still on.

China, however, has yet to confirm the negotiations will resume, with the commerce ministry saying late last week that the two sides were “still discussing” whether a Beijing delegation would travel to the US capital.


 

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