New U.S. tariffs on USD200 billion of Chinese imports, China retaliates with tariffs on USD60 billion, planned negotiations canceled
September 18, 2018 Category Foreign trade, Weekly
U.S. President Donald Trump has announced his decision to impose a 10% tariff on an additional USD200 billion of Chinese imports starting on September 24, on top of the 25% tariffs already in force on USD50 billion of Chinese imports. The tariff rate on the latest batch of goods will rise to 25% on January 1, 2019. The new tariffs would apply to more than 1,000 products, including smartphones, televisions, toys, and a range of other products. Some products, such as smartwatches, were left off the list. These penalties could drive up the cost of a range of products ahead of the crucial holiday shopping season. These tariffs are paid by U.S. companies that import the products, though they often pass the costs along to U.S. consumers in the form of higher prices.
China retaliated by announcing it will impose tariffs on USD60 billion of U.S. imports, effective on September 24. Trump said that in case China retaliated, he would immediately pursue phase three, which is tariffs on approximately USD267 billion of additional imports. This move would subject all Chinese imports of roughly USD500 billion to tariffs. The U.S. president blamed “unfair policies and practices” for the escalation. “For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies. We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices,” Trump said.
President Trump has accused China of a number of unfair trade practices. He wants China to buy more American products, open up China to more U.S. investment, and stop what he calls “stealing U.S. intellectual property”, among other accusations.
Even as President Trump imposes new tariffs, Treasury Secretary Steven Mnuchin was planning to restart talks with Chinese leaders soon, but they have previously announced they would not negotiate with a gun pointed at their heads. President Trump tweeted: ““We are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home.” The U.S. ran a USD233.5 billion deficit in goods trade with China during the first seven months of the year, an 8% increase compared with the same period in 2017. Corporate executives increasingly believe the trade dispute can only be resolved by direct talks between Trump and Chinese President Xi Jinping. The two leaders may see each other at the United Nations General Assembly in New York later this month and are expected to meet on the sidelines of the G20 summit in Buenos Aires in November, the South China Morning Post reports.
China is putting off accepting license applications from American companies in financial services and other industries until Washington makes progress toward a settlement of the ongoing trade war, Jacob Parker, Vice President for China operations at the U.S.-China Business Council (USCBC) said. The license delay applies to industries Beijing has promised to open to foreign competitors, such as banking, securities, insurance and asset management. Chinese authorities denied that licenses were delayed and emphasized that U.S. companies were still welcome in China. Economists have warned that Beijing might also target service industries such as engineering or logistics, in which the United States runs a trade surplus with China.
Chinese Vice Premier Hu Chunhua has called for a rejection of protectionism and said unilateral trade policies by some countries posed a “most serious hazard” to the world economy. “Some countries’ protectionist and unilateral measures are gravely undermining the rules-based multilateral trading regime, posing a most serious hazard to the world economy. We must categorically reject protectionism and unilateralism, firmly support multilateralism, and uphold the world economy and multilateral trading regime,” he said during a visit to Hanoi.
More than 60 U.S. industry groups launched a coalition, Americans for Free Trade, to oppose the imposition of tariffs. The business coalition includes groups representing some of the nation’s largest companies as well as representatives of almost every sector.
Facing the trade war with the U.S., China strengthened its relations with Russia as President Xi jinping attended the fourth Eastern Economic Forum in Vladivostok and held talks with his Russian counterpart Vladimir Putin.
The economy in Guangdong is starting to suffer badly. Its purchasing managers’ index (PMI) shows the province’s manufacturing industry contracted in August for the first time in 29 months, with new orders falling to a 30-month low and new export orders declining for the third straight month. Some companies have already moved to Vietnam to take advantage of lower costs. South Korea’s Samsung Electronics, for instance, is cutting its smartphone production in China, while at the same time strengthening its production lines in Vietnam and India, targeting rising demand in these fast-growing markets as well as making them production bases for exports to the global market.
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