U.S., China fire first shots in tariff war

Leroy Wright
July 7, 2018

China accused the U.S. of launching the "largest trade war in economic history", saying it was "typical trade bullying" that could trigger "global market turmoil".

As the day dawned across the US on Friday, a new economic reality dawned with it: The tariffs long threatened against billions of dollars in Chinese goods took effect just at midnight ET while many Americans were sleeping - but Beijing was ready immediately with a wake-up call of its own.

A U.S. flag is seen during a welcoming ceremony in Beijing, China, November 9, 2017. It will make - it is making already - American consumers pay more for the goods they buy. He said American orders have fallen 30 to 50 per cent compared with a year ago.

International Trade Center Executive Director Arancha Gonzalez told DW that the world was facing "the largest trade conflict since the Second World War". "All we've accomplished is getting more trade barriers".

China has said it would immediately retaliate with its own tariffs, and U.S. President Trump said on Thursday the United States may ultimately impose tariffs on more than a half-trillion dollars worth of Chinese goods, in what may become a fully blown trade war.

Escalating tariffs are likely to slow business investment as companies wait to see whether the administration can reach a truce with Beijing.

And he has promised that Friday's package of economic penalties will not be the last.

"Businesses can adjust to nearly anything, except uncertainty", said Hannah Kain, CEO of Alom Technologies Corp., a supply chain management company. "Markets are still hoping that the key players return to the negotiation table".

Cohen says there is a danger, that this could be a long and drawn out conflict. Officials in Beijing reject accusations of theft and say foreign companies have no obligation to hand over technology. The threat deepened tensions with the European Union, which warns that auto tariffs would inflict pain across its 28 member states. But the administration has also threatened to slap tariffs on US$200 billion in other goods if the dispute continues.

The Chinese government has said it will protect the "legitimate interests" of foreign businesses in China and lessen the fallout from a China-US trade war, in an apparent attempt to ease fears that Beijing could single out US businesses for retaliation. "These tariffs could mean the difference between a profit and a loss for an entire year's worth of work out in the field, and that's only in the near term".

How close is China to imposing the tariff on US crude oil?

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Will there be a full-scale trade war? The Dow Jones industrial average has shed hundreds of points since June 11.

China's currency, the yuan, has dropped 3.5 per cent against the dollar over the past month, giving Chinese companies a price edge over their USA competition.

On the campaign trail, Trump attacked the 24-year-old North American Free Trade Agreement with Canada and Mexico as unfair to the United States. That includes a battery supplied by a Chinese company and the labor used for assembly. USA businesses rely on these products to make their goods, which are eventually sold to United States consumers.

If you like Chick-fil-A sandwiches, for instance, you may feel the effects. Expanding tariffs to more and more goods will weigh on USA consumers, workers and businesses.

A member of China's central bank monetary policy committee, Ma Jun, said Friday that the first punches will have a "limited impact" on the Chinese economy.

One way the tariffs will squeeze farmers, landscapers and construction firms is by raising the price of excavators and loaders made by Bobcat, which uses attachments imported from China.

He cited "scaled-up health, safety and tax checks, delaying the import of goods and boycotts of USA goods".

Tariffs imposed so far by all sides affect about $60 billion of goods, or 0.3 per cent of world trade, according to Slater. Bobcat's raw material costs have also risen because of the administration's steel and aluminum tariffs. Senator Grassley and I sat down with him about two weeks ago and talked through the trade situation. Trump's tariffs around going after industrial goods and technology, a move created to take aim at Chinese President Xi Jinping's heralded Made in China 2025 plan.

But if the issue is not resolved and Trump raises the stakes to tariffs on $ 800 billion imports from all major trading partners, everyone will feel the bite.

American trade groups are urging the two countries to resume talks.

"China can make it much more hard to operate on the mainland", Haft says. "No one wins in a trade war".

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