By imposing tariffs on $200 billion more in Chinese goods starting next week, President Donald Trump has intensified his trade war with Beijing and triggered the likelihood of price increases for many American companies and consumers.
Beijing has said it will swiftly retaliate against American exporters — a move that stands to hurt U.S. farmers and other companies that sell their products to China. Beijing may also raise obstacles for U.S. companies to do business in China.
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Here’s a look at what’s happening and its likely impact.
What is the U.S. doing?
The Trump administration will begin taxing $200 billion in Chinese goods starting Monday. The tariffs will start at 10 per cent and rise to 25 per cent in 2019.WATCH: Trump defiant on tariffs as China levies $60B in tariffs on U.S. goods
The target list is huge, ranging from rattan mats to burglar alarms to bicycles. But the administration struck some items from the originally planned $200 billion tariff list, including bicycle helmets and other child safety products. And, in a victory for Apple Inc., smart watches and some other electronics products won’t be subject to the new tariffs, either.The administration and Beijing have already imposed import taxes on $50 billion worth of each other’s products. Beijing’s target list of U.S. goods to penalize was heavy on agriculture.That’s hardly a coincidence. Its tariffs are meant to deliver pain to American farmers, who overwhelmingly backed Trump in the 2016 election and whose interests are represented by powerful lobbyists and members of Congress. Exports to China account for about 60 per cent of the overseas sales of American soybean farmers, who stand to lose sales as a result of China’s tariffs.
It’s not entirely clear. Economists at Bank of America Merrill Lynch have warned that a full-fledged trade war, especially one that lasts more than a year, would slow the U.S. economy. By disrupting supply chains, eroding business confidence and heightening uncertainty, a trade war, they say, could “push the economy toward full-blown recession” and jeopardize America’s economic expansion — the second-longest on record.Besides American soybean farmers, American manufacturers are also being squeezed. Machinery and components used in finished goods made in the United States have been affected. U.S. manufacturers are having to pay more for parts and equipment, thereby putting them at a competitive disadvantage to foreign rivals.
For a time, it looked as though peace might be at hand. In May, Treasury Secretary Steven Mnuchin declared the trade war “on hold.” The Trump administration suspended its tariffs after Beijing agreed to increase its purchases of U.S. goods, especially in agriculture and energy. The idea was that China’s additional purchases would shrink its trade surplus with the United States. Yet the cease-fire was short-lived. Critics dismissed Beijing’s commitments as vague, and Trump decided to proceed with the tariffs after all.