U.S. and China threaten tariffs as fears rise
The world’s two biggest economies stand at the edge of the most perilous trade conflict since World War II. Yet there’s still time to pull back from the brink.
Financial markets bounced up and down Wednesday over the brewing U.S.-China trade war after Beijing and Washington proposed tariffs on $50 billion worth of each other’s products in a battle over the aggressive tactics China employs to develop its high-tech industries.
“The risks of escalation are clear,’’ Adam Slater, global economist at Oxford Economics, wrote in a research note. “Threats to the U.S.-China relationship are the most dangerous for global growth.’’
There’s time for the two countries to resolve the dispute through negotiations in the coming weeks. The United States will not tax 1,300 Chinese imports — from hearing aids to flamethrowers — until it has spent weeks collecting public comments. It’s likely to get an earful from American farmers and businesses that want to avoid a trade war at all costs.
Also, China did not say when it would impose tariffs on 106 U.S. products, including soybeans and small aircraft, and it announced it is challenging America’s import duties at the World Trade Organization.
Lawrence Kudlow, the top White House economic adviser, sought to ease fears of a deepening trade conflict with China, telling reporters that the tariffs the U.S. announced Tuesday are “potentially’’ just a negotiating ploy.
“We’re very lucky that we have the best negotiator at the table in the president, and we’re going to go through that process,’’ said White House press secretary Sarah Huckabee Sanders. “It will be a couple months before tariffs on either side would go into effect and be implemented, and we’re hopeful that China will do the right thing.’’
The prospect of a negotiated end to the dispute calmed nerves on Wall Street. After plunging in early trading, the Dow Jones industrial average ended up rising 231 points, or nearly 1 per cent, to 24,264.
The sanctions standoff started last month when the United States slapped tariffs on imported steel and aluminum. On Monday, China countered by announcing tariffs on $3 billion worth of U.S. products. The next day, the United States proposed the $50 billion in duties on Chinese imports, and Beijing lashed back within hours with a threat of further tariffs of its own.
Things could easily escalate. The U.S. Treasury is working on plans to restrict Chinese technology investments in the United States. And there’s talk that the U.S. could also put limits on visas for Chinese who want to visit or study in this country.
For its part, China conspicuously left large aircraft off its sanctions list Wednesday, suggesting it is reserving the option to target Boeing if relations deteriorate further.
Douglas Irwin, a Dartmouth College economist who has just written a history of U.S. trade policy, said the tit-for-tat tariffs are shaping up as the biggest trade battle since World War II.