Economics: US ratchets up China trade war, threatens tariffs on $200bn of goods

The Trump administration has raised the stakes in its trade dispute with China, threatening 10% tariffs on a list of $200bn worth of Chinese imports, sending stocks lower and prompting Beijing to warn it would be forced to respond.

China’s Commerce Ministry said on Wednesday it was “shocked” and would complain to the World Trade Organisation, but did not immediately say how it would retaliate. In a statement, it called the US actions “completely unacceptable”.

Beijing has said it would hit back against Washington’s escalating tariff measures, including through “qualitative measures,” a threat that US businesses in China fear could mean anything from stepped-up inspections to delays in investment approvals and even consumer boycotts.

The $200bn far exceeds the total value of goods China imports from the United States, which means Beijing may need to think of creative ways to respond to such US measures.

On Tuesday, US officials issued a list of thousands of Chinese imports the Trump administration wants to hit with the new tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminium, prompting criticism from some US industry groups. It also includes consumer goods ranging from car tyres, furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products.

Last week, Washington imposed 25% tariffs on $34bn of Chinese imports, and Beijing responded immediately with matching tariffs on the same amount of US exports to China. Each side is planning tariffs on a further $16bn in goods that would bring the totals to $50bn.

US President Donald Trump has said he may ultimately impose tariffs on more than $500bn worth of Chinese goods – roughly the total amount of US imports from China last year.

The new list published on Tuesday targets many more consumer goods than those covered under the tariffs imposed last week, raising the direct threat to consumers and retail firms and increasing the stakes for lawmakers in Trump’s Republican party facing elections in November. The list is subject to a two-month public comment period before taking effect.

Alan McQuaid (11/7/18)
Economist