“Trade wars are easy!” President Trump thought China, Mexico, Canada and the E.U. were going to hear his cries and lie down and do whatever he wanted in the face of his tariff threats. He ignorantly believed they would work as a negotiation tool. Instead, they are merely retaliating.
China announced in a statement that as of August 23 it will be levying 25 percent tariffs on another $16 billion of imports from the United States, including things like cars, medical equipment, coal and waste products. The statement from the Chinese Ministry of Commerce included the saccharine comment that “t]he U.S. decision to levy 25 percent tariffs on the same value of Chinese goods is “very unreasonable,” and China will have to retaliate to protect its rightful interests and the multilateral trading system.”
Trade experts have warned those who argue the effects of Trump tariffs have been negligible — despite the near daily reports of American companies hurting from the tariffs — that most of the trickle-down price increases have yet to be felt and likely won’t be until 2019.
China, the world’s largest exporter, has yet to see any real effect from Trump’s tariffs.
China’s exports grew faster than expected in July, while imports surged, showing both domestic and international demand continue for now to shrug off the uncertainty of the trade conflict with the U.S. The world’s largest exporter, China is still benefiting from robust global demand even as increasing tensions and rising trade barriers with the U.S. weigh on the outlook.
Only time will tell the tale on the trade war. In the meantime, so much for Trump’s argument that the tariffs will incentivize China to the bargaining table on trade rather than reciprocate.
The tit-for-tat protectionist measures are poised to surge even higher, with the U.S. reviewing 10 percent duties on a further $200 billion in Chinese imports that it may even raise to 25 percent after a comment period ends on Sept. 6. Should the U.S. proceed with those tariffs, China’s ready to slap duties on an additional $60 billion of American goods.
“We’re not yet past the point of no return but we’re edging closer to it,” said Wang Tao, head of China economic research at UBS AG in Hong Kong. “The risk is that the U.S. administration’s gamble to strong-arm China into giving into all U.S. demands without some compromise only leads to successive rounds of higher and higher tariffs.”
Just remember, America, when you start feeling the squeeze on your purchasing power, the economy is doing so great we can afford a trade war. Got it?