Trade war erupts as China fights back against United States tariffs
07 July, 2018, 08:12 | Author: Eric Barnett
Beijing has retaliated in kind, placing new charges on goods to the same value.
Washington imposed 25 percent tariffs on US$34 billion of Chinese imports, a first step in what could become an accelerating series of tariffs. -China tit-for-tat, as tariffs on soybeans, electric cars, whiskey, livestock and crude oil have been threatened.
"While our 900 member companies continue to suffer from not having a level playing field in China, they are still extremely clear: Increased tensions in the US-China economic relationship will negatively impact their operations in China", William Zarit, chairman of the American Chamber of Commerce in China, warned.
China's President Xi Jinping and President Donald Trump attend a welcome ceremony at the Great Hall of the People in Beijing on November 9, 2017. The pact eliminated most trade barriers among the three countries.
Forecasters say global economic growth could be reduced by up to 0.5 percentage points in 2019-20 if both sides wind up raising tariffs on $250 billion of imports.
The new tariffs will bring back a level of American protectionism that has not been seen since 1970 when the average charge stood at 6.5%.
Tariffs at an average 1.5% in 2016 were the lowest since the U.S. gained independence in 1776.
"Imposing 25% tariffs on U.S. whiskeys could put the brakes on an American export success story", Christine LoCascio, senior vice president for worldwide trade at the Council, said in a statement.
And signs are growing that the escalating global trade dispute is already affecting the world's top economy, with punitive duties now in place for steel and aluminium and the White House threatening to slap duties on auto imports.
The US trade deficit in goods with China now stands at about $375bn.
It has increased sharply since 2001 when China joined the World Trade Organization and started to significantly improve its economic position and relations worldwide.
China's tariff list is heavy on agricultural goods such as soybeans, sorghum and cotton, threatening USA farmers in states that backed Trump in the 2016 US election, such as Texas and Iowa. Another $16 billion of goods could follow in two weeks, Trump said, before suggesting the final total could eventually reach $550 billion, a figure that exceeds all of China's annual goods exports to the U.S.
States such as Louisiana export about $5.7bn of goods to China.
The factory, situated in eastern Zhejiang province, had also made flags for the election campaigns of Hillary Clinton and Trump in 2016, the Washington-based National Public Radio reported.
A model by Pictet Asset Management reckons a 10 per cent tariff on United States trade fully passed on to consumers could tip the global economy into stagflation and knock 2.5 per cent off corporate earnings globally.
The steel and aluminum tariffs have drawn retaliation from a host of US trading partners. If the US and China cool off after a first round of tariffs, the impact on their economies will be modest, according to Bloomberg Economics.
The new tariffs are the result of Trump's orders to take action against China for his belief that the country is engaging in unfair trade practices.
The list avoids direct tariffs on consumer goods such as cellphones and footwear.
China said it would respond with measures of a "corresponding number and quality" if the United States produced a list of products that could be hit.
The move is part of Mr Trump's protectionist agenda, which has undermined the free trade policies that have shaped the global exchange of goods in recent decades.
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