US-China trade war now enters decisive stage
Trump now lines up huge tariffs, ignores warnings from IMF and economists
Steep American tariffs on Chinese goods worth tens of billions of dollars were due to take effect when the clock struck twelve last night, as US President Donald Trump fires the first salvo in a trade war between the world’s top two economies.
China has vowed to respond “immediately”, with experts warning that tit-for-tat measures between the two financial superpowers will send shockwaves around the global economy and strike at the heart of the world trading system.
The US will levy a 25% tariff on more than 800 Chinese product categories worth around $34-billion (R465-billion) and has warned of more to come if a trade war escalates.
Trump threatened to progressively ratchet up US penalties to a total of $450-billion (R6.1trillion) in goods – which would represent the lion’s share of all of China’s exports to the US.
The tariffs target a broad spectrum of Chinese goods – such as passenger vehicles, radio transmitters, aircraft parts and computer hard drives – from industries Washington says have benefited from unfair trade practises.
A second tranche of 284 goods worth $16-billion (R218billion) is under review and could be added to the US list.
China is expected to retaliate as soon as the US tariffs go into effect, imposing duties on goods worth roughly the same amount but with a greater emphasis on politically sensitive farm agricultural products.
“The US has provoked this trade war. We do not want to fight it, but in order to safeguard the interests of the country and the people, we have no choice but to fight,” said Gao Feng, spokesman for China’s commerce ministry.
Christine Lagarde, head of the International Monetary Fund, has already sounded the alarm about a tit-for-tat cycle of retaliation, saying it would only create “losers on both sides”.
And Gao noted that of the $34-billion in taxable products on the US list, about $20-billion (R273-billion) – or nearly twothirds – are made by firms with foreign investment, including a “significant portion” from America. “The US’s measures are essentially attacking the global supply and value chain. Simply put, the US is opening fire on the whole world, and also firing at itself,” Gao said.
Economists have for months warned of the potential damage to the US and global economies.
But the Trump team has paid little heed to those warnings, with Commerce Secretary Wilbur Ross this week slamming them as “premature and probably quite inaccurate”.