Chinese Vice Minister of Commerce Wang Shouwen and his delegation in Washington

The latest batch of U.S. tariffs on Chinese imports went into effect on August 23, targeting another USD16 billion worth of goods. In retaliation, China has slapped hundreds of U.S. products with 25% tariffs on USD16 billion worth of U.S. imports. Calling the latest round of sanctions a “clear violation” of WTO trade rules, China’s Ministry of Commerce (MOFCOM) stressed that it will continue to introduce all the “necessary countermeasures” in order to defend free trade and China’s “legitimate rights and interests.” “China will file a lawsuit against this tariff measure under the WTO dispute settlement mechanism,” the statement said. Beijing’s remarks were voiced shortly after U.S. Customs and Border Protection confirmed that a round of new 25% duties on 279 Chinese import product categories, valued at USD16 billion, officially went into effect. Key products affected by the new duties include chemicals and plastics, as well as semiconductors, motorbikes and electric scooters.

The trade war escalated despite the meeting between Chinese Vice Commerce Minister Wang Shouwen and U.S. Treasury Under Secretary David Malpass in Washington. Two days of trade consultations between China and the U.S. showed that both countries do not want an all-out trade war and that disputes might be resolved through further talks by mid-2019, Chinese experts said.
hina’s Ministry of Commerce (MOFCOM) said the two countries will keep in contact on future arrangements.

Six days of public hearings on the impact of an upcoming round of tariffs on Chinese products were held in the U.S. Nearly 400 companies and trade groups testified, hoping to influence the final list of products subject to tariffs. President Donald Trump has directed the U.S. Trade Representative (USTR) to consider increasing the additional duty from 10% to 25% on USD200 billion worth of Chinese imports, targeting thousands of consumer products ranging from chemicals to cosmetics. Many executives testified that production of the targeted Chinese imports could not feasibly shift to the U.S. Ross Bishop, President of BrightLine Bags, whose products are manufactured in China, said: “We’ve made three specific and concerted attempts to get our bags made in the U.S. and have learned from each instance that our costs would triple compared to what we pay now, and the detailed quality isn’t as good.”

The Beijing-based China Chamber of Commerce for Import and Export of Machinery and Electronic Products urged the U.S. government to remove products such as refrigerators from the proposed tariff list, according to the China Daily. U.S. companies warned additional China tariffs will cripple their business and hurt customers, raising prices on everything from bicycles to car seats to refrigerators.

Representatives of China’s wood and furniture manufacturing sector warned that if additional tariffs are imposed on Chinese imports into the U.S. many consumers would be unable to furnish a home. In a 2016 study, the National Association of Home Builders estimated that for every USD1,000 increase in the price of a home, about 152,903 households are priced out of the market for a median-priced new home. The USD1,000 price increase will be easy to reach with escalating tariffs. Wood products are used primarily in new-home construction and home remodeling, so any additional tariffs will have a major impact on those sectors in the U.S.

Due to unfavorable market conditions, American Airlines has decided to temporarily discontinue flights between Shanghai and Chicago, while Hawaiian Airlines will stop operating direct flights between Beijing and Honolulu after the weeklong National Day holiday in October. Both airlines cited rising fuel costs. Ongoing trade tensions affect business travel, while business and tourism visa approvals have become tighter, slowing down travel demand growth.

Officials at the People’s Bank of China (PBOC) reiterated that China will not use the yuan as a weapon to deal with trade frictions.