US, China’s 25% tariffs kick in

TIT-FOR-TAT WAR: AFFECTS R16BN OF GOODS FROM BOTH

May damage global economic growth and countries tied into China’s supply chain.

Beijing

The US and China escalated their acrimonious trade war yesterday, implementing punitive 25% tariffs on $16 billion (R228 billion) worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington.

The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth.

China’s commerce ministry said Washington was “remaining obstinate” by implementing the latest tariffs, which kicked in on both sides at 12.01pm in Beijing. “China resolutely opposes this, and will continue to take necessary countermeasures,” it said.

“At the same time, to safeguard free trade and multilateral systems, and defend its own lawful interests, China will file suit regarding these tariff measures under the WTO (World Trade Organisation) dispute resolution mechanism.”

President Donald Trump has threatened to put duties on almost all the more than $500 billion of Chinese goods exported to the US annually unless Beijing agrees to big changes to its intellectual property practices, industrial subsidy programmes and tariff structures, and buys more US goods.

That figure would be far more than China imports from the US, raising concerns Beijing could consider other forms of retaliation, such as making life more difficult for US firms in China or allowing its currency to weaken further to support its exporters.

Trump administration officials have been divided over how hard to press Beijing, but the White House appears to believe it is winning the trade war as China’s economy slows and its stock markets tumble.

US Commerce Secretary Wilbur Ross recently told CNBC: “We have many more bullets than they do. They know it. We have a much stronger economy than they do, they know that too.”

Economists reckon that every $100 billion of imports hit by tariffs would reduce global trade by 0.5%.

They assumed a direct impact on China’s economic growth in 2018 of 0.1 to 0.3 percentage points, and less for the US, but the impact will be bigger next year, along with collateral damage for other countries tied into China’s global supply chains. – Reuters