China Announces Retaliatory Tariffs on U.S. Goods
April 5, 2018
This week, both the Trump Administration and China’s State Council announced plans to impose tariffs applying to a wide range of goods. The U.S. announcement resulted from White House investigations that found China uses unfair trading practices, while the two Chinese announcements are in direct response to the U.S. tariffs. Though there is generally an agreement that China’s unfair trading practices need a response, broad tariffs are not likely to result in changes in Chinese government policy. Instead, this week’s developments give credence to the cautions that new tariffs could provoke retaliation that would negatively impact U.S. agriculture, other goods, and service exports and further raise costs for businesses and consumers.
The first announcement of this week came from the Chinese government, according to Chris Buckley of The New York Times:
The Chinese government hit back Monday at President Trump’s tariffs on steel and aluminum by acting on a threat to put tariffs as high as 25 percent on imports of 128 American-made products, including pork and seamless steel pipes. The Chinese Ministry of Commerce indicated that the tariffs, which it first publicly suggested almost two weeks ago, were intended to pressure the Trump administration to back down from a simmering trade war.
According to The New York Times’ Ann Swanson:
The Trump administration said Tuesday that it will place a 25 percent tariff on Chinese products like flat-screen televisions, medical devices, aircraft parts and batteries, outlining more than 1,300 imported goods that will soon face levies as part of a sweeping trade measure aimed at penalizing China for its trade practices.
The move, which stems from a White House investigation into China’s use of pressure, intimidation and theft to obtain American technologies, is likely to inflame an already-simmering trade war between the countries…The tariffs will be imposed on a total of $50 billion worth of Chinese products each year.
The $12.5 billion worth of new tariffs proposed by the U.S. is “essentially the government taking back about half of that roughly $26 billion-a-year tax cut it just delivered to manufactures,” notes David Fickling of Bloomberg. Soon after the list of 1,300 products was proposed, China responded with its own list of U.S. products to target as reported in The Wall Street Journal:
Hours after the Trump administration unveiled plans to impose tariffs of 25% on Chinese products worth $50 billion, China’s State Council announced Wednesday that it would levy penalties of the same rate on U.S. goods of a similar value.
While the Trump list would affect 1,300 categories of goods, China critically is targeting a narrower range of 106 types of U.S. goods, many of them high-profile. Soybeans and smaller commercial passenger planes, mostly made by Boeing Co., are the most valuable U.S. exports to China, worth nearly $23 billion last year.
Also prominent in China’s retaliation are sport-utility vehicles and other agricultural products, from beef to sorghum—goods that were chosen to hit U.S. states that supported President Donald Trump, according to people familiar with Beijing’s plans.
Measures already indicate that domestic steel and aluminum prices are rising, primarily because of the U.S. imposition of steel and aluminum tariffs. If additional tariffs and in-kind retaliatory actions continue to be taken, the harm caused to U.S. businesses and consumers will intensify over time. The administration would do well to not follow a path of imposing tariffs that could dampen the U.S. economic outlook.