U.S. set to impose tariffs on USD200 billion worth of Chinese imports, China to retaliate
September 11, 2018 Category Foreign trade, Weekly
U.S. President Donald Trump is set to impose another wave of tariffs of 10% to 25% on USD200 billion of Chinese imports and is already planning for additional tariffs on USD267 billion. If he goes ahead with both waves, all Chinese imports would be hit by tariffs. The public had until September 6 to comment on the USD200 billion measure, which is expected to be approved by Trump in the coming days. “The USD200 billion we are talking about could take place very soon depending on what happens with them. To a certain extent it’s going to be up to China,” Trump said. “And I hate to say this, but behind that is another USD267 billion ready to go on short notice if I want. That totally changes the equation,” he added.
China has announced that it would retaliate. China has already in early August announced tariffs on USD60 billion worth of U.S. goods to be imposed if the U.S. would go ahead with tariffs on USD200 billion worth of Chinese goods. Economic tensions between the two countries were heightened further when official data showed that China’s trade surplus with the U.S. widened to the record level of USD31.05 billion in August. Over the first eight months of the year, China’s surplus with the U.S. has risen nearly 15%.
Donald Trump tweeted that Apple should make products in the United States if it wants to avoid tariffs on Chinese imports. “Make your products in the United States instead of China. Start building new plants now. Exciting!,” the U.S. President said. Apple had told trade officials in a letter that the proposed tariffs would affect prices for a “wide range” of Apple products, watch.
Apple is highly exposed to a trade war between the U.S. and China. It makes many of its products for the U.S. market in China, and it also sells gadgets including the iPhone in China, making them a potential target for Chinese retaliation against the Trump tariffs. The technology sector is among the biggest potential losers as tariffs would make imported computer parts more expensive. “The burden of the proposed tariffs will fall much more heavily on the United States than on China,” Apple said in its letter. The bestselling iPhone is not affected by the current round of tariffs but mobile phones would be covered in the USD267 billion of tariffs Trump suggested might be in the pipeline. Apple said proposed U.S. tariffs on USD200 billion worth of products imported from China will raise prices for some of its popular consumer goods such as the Apple Watch and AirPods headphones. The Mac mini desktop computer, Apple Pencil stylus accessory for iPads, various chargers and adaptors and tooling equipment will also be affected, the Cupertino, California-based company told the Office of U.S. Trade Representative (USTR). Apple generated USD9.6 billion in sales in China in the fiscal third quarter, accounting for 18% of its total revenue in the period.
Intel is supporting Apple’s opposition to the tariffs and broadening the argument. Computer and phone makers are involved in a global supply chain that includes Chinese manufacturing, and that cannot be easily excluded without harm to U.S. companies, Intel said. “Semiconductors are America’s fourth-largest export, and our industry has a global trade surplus of over USD6 billion and a surplus with China of close to USD2 billion in 2017,” Intel’s letter said.
Which U.S. states will be hardest hit by the trade dispute? A Business Insider report predicted that the biggest loser from the trade dispute would be Tennessee, as trade with China accounts for 7.6% of the state’s total GDP, followed by Washington state, California, South Carolina and Kentucky, where 5% or more of state GDP comes from the China trade. The report said 6.39% of California’s GDP comes from trade with China. However, an Assembly Joint Resolution approved by California’s Congress indicated that California does more business with China than any other U.S. state. In 2017, the total trade volume between California and China was USD175.6 billion, accounting for 27.6% of the United States’ trade with China. Meanwhile, California’s exports to China amounted to USD16.4 billion in 2017, accounting for 12.6% of U.S.exports to China.
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