U.S.-China tariff threats inch toward trade war
If implemented, global growth could take hit
WASHINGTON — The United States and China edged closer Tuesday to triggering the riskiest trade war in decades, a fight that could weaken the world’s two largest economies and crimp global growth.
If the tariffs the two countries have threatened to slap on each other’s exports take effect, their consumers would have to pay higher retail prices. Companies would pay more for imported parts and would have to decide whether to absorb the higher costs or pass them on to customers.
American farmers could be evicted from a lucrative market. U.S. companies, from Caterpillar to Qualcomm, would likely face obstruction from regulators in China, a market they rely on for an outsize share of sales.
The standoff, mostly over China’s sharp-elbowed drive to supplant U.S. technological dominance, threatens to tip “the U.S. and China into a downward spiral like the world hasn’t seen since the trade war that plunged us deeper in the Great Depression and into the Second World War,” warned Matt Gold, professor of international trade law at the Fordham Law School and a former U.S. trade official.
Financial markets buckled after President Donald Trump ratcheted up the tensions by proposing a fresh batch of tariffs. The Dow Jones industrial average closed down nearly 300 points — more than 1 percent — on its sixth straight losing day.
Trump previously ordered 25 percent tariffs on $50 billion in Chinese goods in retaliation for Beijing’s forced transfer of U.S. technology and for intellectual property theft. Those tariffs, set to start taking effect July 6, were matched by China’s threat to penalize U.S. exports.
Beijing’s response drew the president’s ire. On Monday night, Trump told his U.S. trade representative, Robert Lighthizer, to target an additional $200 billion in Chinese goods for 10 percent tariffs. These penalties would take effect, the White House said, “if China refuses to change its practices” and proceeds with its plans for retaliatory tariffs.
The tit-for-tat penalties could
escalate further yet: Trump threatened tariffs on $200 billion more in Chinese products if Beijing lashes back again. Combined, the potential tariffs on Beijing could cover $450 billion — a sum equal to 89 percent of Chinese goods imported to the United States last year.
The tariffs would start to slow U.S. growth, economists warn. Oxford Economics estimates that if Trump imposed the $200 billion in tariffs and China responded in kind, U.S. growth could slow by 0.3 percentage point next year.
Trump is gambling that Beijing has the most to lose. China couldn’t come close to matching America’s tariffs on $450 billion of Chinese exports. The United States sold only $130 billion of goods to China last year.
But Beijing has chosen its targets strategically. Soybeans are on the list — a direct shot at a swath of Trump supporters in the American heartland. About 60 percent of U.S. soybean exports go to China. And Beijing has other ways to inflict pain on American companies.
U.S. companies have an increasingly sizable stake in the fast-growing Chinese market. They’ve invested a cumulative $256 billion there since 1990, according to the Rhodium Group research firm and the National Committee on U.S.-China Relations.