What China’s tariffs mean for the U.S.

- April 04, 2018

The war of tit-for-tat tariffs between the United States and China escalated further on Wednesday when Beijing unveiled a list of U.S. exports worth about $50 billion that it plans to target with a new set of duties.

That move came only hours after President Donald Trump’s administration unveiled its own list of Chinese exports worth roughly the same amount that it plans to target with tariffs, a move meant to punish China for what the White House sees as the theft of intellectual property and forced transfer of valuable technologies.

It also marked the third set of duties announced between the two countries this week, after Beijing announced Sunday it was imposing penalties on $3 billion in U.S. exports on products like pork, recycled aluminum, fruit and wine.

What is actually affected?

The latest set of tariffs unveiled on Wednesday targets more than 100 different U.S. exports to the country that fall in 14 different categories, China’s Ministry of Commerce said in a statement announcing the move. Prominent products that will be affected include soybeans, automobiles, airplanes and chemicals, the government said. Other agricultural commodities will also be affected.

China said all of the goods will face a 25 percent tariff.

Is there time to stop the tariffs from taking effect?

Yes, though it will depend on the United States and China working out a deal — and with escalating rhetoric on both sides, it isn't clear whether that will happen. China says the implementation date for its tariffs will depend on when the U.S. government imposes its $50 billion in tariffs on Chinese products.

The Trump administration says it will consult with domestic industry and the private sector before making any final decision, which is not expected until late May at the earliest.

The Office of the U.S. Trade Representative said it would hold a public hearing on May 15 on its tariff plans and outlined a public comment process that will end a week later, on May 22.

Trump and other senior administration officials have signaled that they are open to working toward some sort of resolution with China, but it’s not clear what steps they want Beijing to take. Treasury Secretary Steven Mnuchin said last week that the two countries were negotiating and noted Trump’s desire to cut the trade deficit by $100 billion over the next year.

“We want to eliminate forced joint ventures, forced technology, and we're having very productive conversations with them,” Mnuchin said. But he warned that tariffs are not being put on hold “unless we have an acceptable agreement that the president signs off on.”

China indicated Wednesday that it could be difficult to find a middle ground. The door to negotiations “is always open” and Beijing stands ready to resolve trade frictions with the U.S. on the basis of “mutual respect,” Deputy Commerce Minister Wang Shouwen said at a press conference.

But the demand to reduce the U.S. trade deficit with China by $100 billion is “totally unacceptable," he said.

How big are these tariffs in terms of the U.S. market?

The tariffs do affect some of the biggest international trade between the two nations, but they also target only a small fraction of the broader U.S. economy.

Soybeans, for example, will be heavily affected: 62 percent of all U.S. exports of the product go to China, and an added tariff on the product would mean an annual loss in economic well-being between $1.7 billion and $3.3 billion, according to a recent study from Purdue University. The 25 percent tariff announced would lead to damage toward the higher end of that range.

The $50 billion in products that would face new tariffs on their way into the Chinese markets represented less than 30 percent of the nearly $170 billion in goods that U.S. exporters shipped over last year, according to USTR data. And viewed in terms of the overall $19 trillion U.S. economy, the affected goods represent about a quarter of 1 percent.


 

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