The Trump administration slapped tariffs on about $110 billion in Chinese imports on Sunday, marking the latest escalation in a trade war that is inflicting damage across the world economy.
The 15 per cent duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160bn in Chinese goods - including laptops and mobile phones - will be hit with 15 per cent duties on December 15. President Donald Trump delayed part of the levies to blunt the impact on holiday shopping. China has retaliated with the imposition of more tariffs on goods imported from the US.
While the Trump administration has dismissed concern about a protracted trade war, business groups are calling for a tariff truce and the resumption of negotiations between the world’s two-largest economies.
Face-to-face talks between Chinese and American trade negotiators scheduled for Washington in September are still happening “as of now,” Trump told reporters Friday before going to Camp David, the US presidential retreat.
“We’re going to win the fight,” he said.
While Trump has repeatedly said China is paying for his tariffs, many companies and economists say that U.S. importers bear the cost - and some of it is passed on to consumers.
The non-partisan Congressional Budget Office in August projected that by 2020, Trump’s tariffs and trade war will reduce the level of real US GDP by about 0.3 per cent and reduce average real household income by $580.
That followed a JPMorgan Chase & Co note to clients estimating that the latest round of tariffs will increase the average cost per US household to $1,000 a year - up from $600 for duties imposed last year. That estimate is in the low range because it was based on a duty rate of 10 per cent, before Trump increased it to 15 per cent.
About 90 per cent of California-based JLab Audio’s headphones and other wireless products targeted for duties were hit on Sunday, possibly hurting holiday sales and forcing a delay in hiring, chief executive Win Cramer said. About 40 per cent of the company’s sales come in the fourth quarter, he said.
“If I had hair, I’d be pulling it out,” Cramer said. “I’m really concerned about the financial performance of the business, knowing that if we continue to eat this cost, how much it hurts.”
The tariffs are also harming the global economy. The International Monetary Fund in July further reduced its world growth outlook, already the lowest since the financial crisis, amid the uncertainty from the trade conflict.
China’s retaliation took effect as of 12:01pm on Sunday in Beijing, with higher tariffs being rolled out in stages on a total of about $75bn of US goods. Its target list strikes at the heart of Trump’s political support - factories and farms across the Midwest and South at a time when the US economy is showing signs of slowing down.
Higher Chinese duties that took effect on September 1 include an extra 10 per cent on American pork, beef and chicken, and various other agricultural goods, while soybeans will get hit with an additional 5 per cent tariff on top of the existing 25 per cent. Starting in mid-December, a further 10 per cent tariff will be introduced on American wheat, sorghum, and cotton. While China imposed a new 5 per cent levy on US crude oil starting from September, there was no new tariff on liquefied natural gas.
The resumption of a suspended extra 25 per cent duty on US cars will resume on December 15, with another 10 per cent on top for some vehicles. With existing general duties on autos taken into account, the total tariff charged on US-made cars would be as high as 50 per cent.
Gary Shapiro, president of the Consumer Technology Association, said the Trump administration’s approach of using tariffs to pressure China into a deal has backfired.
“US companies have to spend more resources on constantly changing trade rules and less on innovation, new products and our economic health,” Shapiro said. “This is not how you reach a meaningful trade agreement.”
