China, US raise tariffs ahead of planned trade talks this month

THE United States and China went ahead with their latest tariff increases on each other’s goods yesterday, potentially raising prices Americans will pay for some clothes, shoes, sporting goods and other consumer items ahead of the holiday shopping season.

The 15 percent US taxes apply to about US$112 billion of Chinese imports. All told, more than two-thirds of the consumer goods the United States imports from China now face higher taxes. The administration had largely avoided hitting consumer items in its earlier rounds of tariff hikes.

But with prices of many retail goods now likely to rise, the Trump administration’s move threatens the US economy’s main driver: consumer spending. As businesses pull back on investment spending and exports slow in the face of weak global growth, American shoppers have been a key bright spot for the economy.

As a result of Trump’s higher tariffs, many US companies have warned that they will be forced to pass on to their customers the higher prices they will pay on Chinese imports. Some businesses, though, may decide in the end to absorb the higher costs rather than raise prices for their customers.

China began charging higher duties on American imports at midday yesterday, according to previous announcements by China’s Ministry of Commerce.

Tariffs of 10 percent and 5 percent apply to items ranging from frozen sweet corn and pork liver to marble and bicycle tires, the government announced earlier.

After yesterday’s tariff hike, 87 percent of textiles and clothing the United States buys from China and 52 percent of shoes will be subject to import taxes.

Negotiators from both countries have planned to meet again this month in the US. China’s Ministry of Commerce said that the new round of US tariffs will not be conducive to beneficial trade talks. It expressed hopes the US can return to normal bilateral trade, on the basis of “fairness” and “mutual respect,” rather than “continuing conflict.”

On December 15, the Trump administration is scheduled to impose a second round of 15 percent tariffs — this time on roughly US$160 billion of imports. If those duties take effect, virtually all goods imported from China will be covered.

The Chinese government has released a list of American imports targeted for penalties on December 15 if the US tariff hikes take effect. In total, Beijing says yesterday’s penalties and the planned December increases will apply to US$75 billion of American goods.

Washington and Beijing are locked in a trade war for about two years.

The Trump administration has imposed import taxes on billions of dollars’ worth of Chinese imports, and China has retaliated with tariffs on US exports.

Trump has insisted that China itself pays the tariffs. But in fact, economic research has concluded that the costs of the duties fall on US businesses and consumers.

Trump had indirectly acknowledged the tariffs’ impact by delaying some of the duties until December 15, after holiday goods are already on store shelves.

A study by JP Morgan found that Trump’s tariffs will cost the average US household US$1,000 a year. That study was done before Trump raised the September 1 and December 15 tariffs to 15 percent from 10 percent.

The president has also announced that existing 25 percent tariffs on a separate group of US$250 billion of Chinese imports will increase to 30 percent on October 1.

That cost could weaken an already slowing US economy. Though consumer spending grew last quarter at its fastest pace in five years, the overall economy expanded at just a modest 2 percent annual rate, down from a 3.1 percent rate in the first three months of the year.

The economy is widely expected to slow further in the months ahead as income growth slows, businesses delay expansions and higher prices from tariffs depress consumer spending.

Companies have already reduced investment spending, and exports have dropped against a backdrop of slower global growth.

Americans have already turned more pessimistic. The University of Michigan’s consumer sentiment index, released on Friday, fell by the most since December 2012.

(Agencies)