It’s on: U.S., China wage a trade war
White House slaps $34B of tariffs on Beijing, which then retaliates.
A trade war between the world’s two largest economies officially began Friday morning as the White House followed through with its threat to impose tariffs on $34 billion worth of Chinese products, a significant escalation of a fight that could hurt companies and consumers in both the United States and China.
The penalties, which went into effect at 12:01 a.m., prompted quick retaliation by Beijing. China said it immediately put its own similarly sized tariffs on U.S. goods.
Previously, the Chinese government had said it would tax pork, soybeans and automobiles, among other products.
China’s Ministry of Commerce said in a statement that the United States “has launched the biggest trade war in economic history so far.”
The escalation of the trade war from threat to reality is expected to ripple through global supply chains, raise costs for businesses and consumers and roil global stock markets, which have been volatile in anticipation of a prolonged trade fight between the
United States and almost everyone else.
On Thursday, President Donald Trump showed no signs of backing down from his fight, saying aboard Air Force One that the first wave of tariffs on $34 billion in goods would quickly be followed by levies on another $16 billion of Chinese products. And the president continued to threaten Beijing with escalating tariffs on as much as $450 billion worth of Chinese goods.
For now, it is unclear how — or whether — the trade war might conclude. Trump’s threats have been met with vows from China to retaliate, a stalemate that will require one side to blink first in order to avoid a protracted fight. With no official talks scheduled between the two countries, and disagreements within the Trump administration about how best to proceed, a quick resolution seems increasingly unlikely.
“At the moment, I don’t see how this ends,” said Edward Alden, a senior fellow at the Council on Foreign Relations. “This is very much in the president’s hands because he’s got advisers that seem divided, some substantively, some tactically. I just don’t think we’ve had any clear signs of the resolution he wants.”
Trump’s aggressive stance toward China is aimed at pressuring the country to curtail what the White House describes as a pattern of unfair trade practices and theft of U.S. intellectual property. In addition to the tariffs, the White House is placing restrictions on investment and on visas for Chinese nationals. The administration says the trade barriers are being used as leverage to force Beijing to make changes, including opening its markets to U.S. companies and ending its practice of requiring firms operating in China to hand over valuable technology.
But the trade measures come at a cost for U.S. firms, which are facing potentially devastating disruptions to their businesses. Companies like Husco International, a Wisconsin-based manufacturing company that makes parts for companies like Ford, General Motors, Caterpillar and John Deere, now face a 25 percent increase on a variety of parts imported from China. CEO Austin Ramirez said that increase would immediately put him and other U.S. manufacturers at a disadvantage.
“The people it helps most of all are my competitors in Germany and Japan, who also have large parts of their supply chain in Asia but don’t have these tariffs,” he said.
Ramirez said his company would not be able to absorb the additional costs, and would be forced to try to pass them on to suppliers or customers — if it could. He was also fearful of how China’s tit-for-tat retaliation would ultimately affect his business in that country.
“One of the big scary unknowns is we don’t know how China will react,” Ramirez said. “There are lots of things they could do to make life difficult for U.S. businesses operating in China that would be detrimental to us.”
Brent Bible, a farmer who cultivates 5,000 acres of corn and soy in western Indiana, said the trade war was already damaging his farm and the broader agricultural economy. More than half of U.S. soybeans that are exported go to China, giving the country influence over the price of the U.S. crop. Trade worries have pushed down the price of soybeans roughly 15 percent in recent months, erasing his typical yearly profit margin of 8 percent to 10 percent.
China’s Commerce Ministry accused the U.S. of “typical trade bullying” and said in a statement that its tariffs “will impact innocent multinational companies and ordinary enterprises and consumers alike.”
“It will also harm the interests of U.S. businesses and its people,” it said.