US-China trade war ramps up as tariffs on US$200 billion in Chinese imports take effect

The third round of US tariffs on Chinese imports is an escalation of the conflict between the world’s two biggest economies

PUBLISHED : Monday, 24 September, 2018, 2:09pm
UPDATED : Monday, 24 September, 2018, 2:21pm

The Trump administration’s tariffs on another US$200 billion in Chinese goods kicked in on Monday, ramping up a trade war between the world’s two biggest economies.

The latest round of US duties took effect just after midnight Washington time on Monday (noon in Beijing) on a list of products ranging from frozen meat to television components. China is poised to retaliate with tariffs on US$60 billion in US goods, a move that President Donald Trump has said would spur new duties on another US$267 billion in Chinese imports.

If the president follows through on the escalation threat, US tariffs would cover all goods the nation imported from China last year. The conflict risks descending into a war of attrition that economists warn could undermine the global economy and upend the supply chains of multinational companies.

On Saturday China called off planned trade talks with US officials amid the escalation. The US State Department’s sanctions against China’s defence agency and its director on Thursday had contributed to the decision, according to people familiar with the situation. There is a growing consensus in Beijing that substantive talks will only be possible after the US midterm elections in November, they said.

Even as both sides slap fresh levies on each others’ products, they have peppered statements with offers to talk.

“President Trump has an excellent relationship with President Xi and our teams have been in frequent communication since President Trump took office,” Lindsay Walters, deputy White House press secretary, said in an emailed statement. “We remain open to continuing discussions with China, but China must meaningfully engage on the unfair trading practices.”

China accuses US President Donald Trump of ‘bullying’ on trade but calls for cooperation

Neither side has backed down since the tit-for-tat tariff war began in July, when the US imposed duties on US$34 billion in Chinese goods. The Trump administration imposed a further US$16 billion in August. China retaliated in kind to both moves.

Efforts at diplomacy have failed, with no breakthroughs since high-level talks began in May. And things are set to get worse: The 10 per cent tariffs on US$200 billion in Chinese goods will rise to 25 per cent in January if Beijing refuses to offer concessions.

Companies complain that the time frame between announcement of the latest levies and implementation of the tariffs on thousands of products is too short. A protracted trade war will fuel inflation in the US, particularly as tariffs are added to categories such as furniture, apparel and technology, according to analysts at Bloomberg Intelligence.

Will the US-China trade war quagmire take as long as the Vietnam war to untangle?

“Retailers are already facing a tidal wave of tariffs. This latest tranche is a tsunami,” said Hun Quach, vice-president of international trade for the Retail Industry Leaders Association. “With thousands of consumer products included, little warning, and no time to prepare, businesses are left scrambling.”

Beijing’s plans for tariffs on US$60 billion of US goods that are also set to take effect Monday include an additional 5 per cent duty on about 1,600 kinds of US products including computers and textiles and an extra 10 per cent on more than 3,500 items including chemicals, meat, wheat, wine and liquefied natural gas.

Administration officials have repeatedly warned that the president is serious about his pledge to rebalance the trading relationship and that Chinese retaliation will only lead to further US duties.

Asked last week if Beijing’s planned retaliation was a guarantee that Trump would go ahead with the next round of duties, White House trade adviser Peter Navarro said on NPR’s Morning Edition that “the president was crystal clear in his statement: if China retaliates, the process will move forward on the additional amount”.

Edward Alden, senior fellow at the Council on Foreign Relations in Washington, said there was a chance the trade war could spiral out of control but that there is “a window for serious negotiation”.

“The Trump administration must get its position straight though – what does it want from China, and who is empowered as a negotiator by President Trump to bring the deal home? Unless that happens, serious negotiations will be impossible and the likelihood of continued escalation increases,” Alden said.

Amid the onset of economic damage for both economies, state newspaper China Daily reached into the US heartland in an advertising supplement in Iowa’s largest newspaper to highlight the impact on the state’s soybean farmers as “the fruit of a president’s folly”.

The four-page section in Sunday’s Des Moines Register, which carried the label “paid for and prepared solely by China Daily, an official publication of the People’s Republic of China”, featured articles including one outlining how the trade dispute is forcing Chinese importers to turn to South America instead of the US for soybeans.