U.S. tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday, and with Beijing having vowed to respond immediately in kind, as the two biggest economies headed on a risky path toward a full-blown trade war. It also is rooted in the clash between American notions of free trade and Beijing's state-led development model.
As US tariffs on Chinese imports worth $34 billion kicked in on Friday, President Donald Trump said he would consider imposing additional levies on $500 billion in Chinese goods, should Beijing retaliate.
In particular, the United States "will impose a 25% tariff on $50 billion of goods imported from China containing industrially significant technology, including those related to the "Made in China 2025" program", the statement said.
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 tariffs were originally announced in March, but a series of procedural delays and trade negotiations pushed back implementation to Friday. It's the first time the USA has imposed tariffs directly aimed at Chinese goods following months in which Trump accused Beijing of stealing American intellectual property and unfairly swelling America's trade deficit. As an example, Chinese companies are reselling US soybeans, and Chinese companies are expected to cancel most of the remaining soybeans they have committed to buy from the U.S.in the year ending August 31, once the extra tariffs take effect.
The impact of the first round of tariffs on $34 billion in Chinese goods will be "quite small", said Ethan Harris, head of global economic research at Bank of America Merrill Lynch.
China's tariffs, on the other hand, will hit agricultural products like soybeans and pork. The tariffs are created to hurt parts of the United States that are politically aligned with Trump. "And it's making American companies less competitive", Gonzalez said. Gregory Daco, head of US economics at Oxford Economics, has calculated that they would pare growth in both countries by no more than 0.2 percent through 2020.
Adding to concerns this week was a leaked report suggesting Trump had asked his officials to look at pulling the USA out of the World Trade Organisation (WTO) altogether.
"If we can seize our own market, we will be less affected by the trade war", said a spokesperson for Topsun, a furniture manufacturer in Zhejiang province. Trump's attempt to use the steel and aluminum tariffs to pry concessions from the Mexicans and Canadians proved futile. Chinese companies and investors girded for the worst, while economists cautioned any impact on the economy would be minimal.
Trump ran for the White House on a vow to reverse decades of US policy by scrapping deals that he said put American manufacturers at a competitive disadvantage and by forcing USA trading partners to shrink their trade surpluses with the United States.
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. "We need to get our goods out there and get them sold".
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