Trump escalates trade war, again | Politics News | SupChina

Trump escalates trade war, again

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U.S. President Donald Trump is preparing to go all in on his big bet on tariffs against China.

China’s tit-for-tat response to the first $50 billion round of tariffs, which were announced on June 15 (tit and tat both covered on SupChina Access), disappointed Trump, who released a statement that read:

Today, I directed the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced. If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods.

That would place a tax on nearly every product that comes into China from the U.S., as the Wall Street Journal points out (paywall):

A third round of tariffs would bring the total imports from China subject to U.S. tariffs to $450 billion, almost as much as the $505 billion in goods that the U.S. imported from China last year.

Markets around the world fell after the news of the dramatic and sudden escalation.

  • “The Dow sank around 350 points, or 1.4%, on Tuesday. That put it in negative territory for the year and on track for its sixth straight day of losses,” CNN reports.
  • American semiconductor makers saw larger losses at 2 percent or more due to their high exposure in China, according to CNBC.
  • Chinese stock markets also sank, with “Shanghai closing down 3.78 percent, its biggest drop in two years, and Shenzhen down 5.31 percent,” the Washington Post says.
  • “Every asset class is affected now by the U.S.-China trade war,” a German stock trader told Bloomberg (paywall), in a report that notes “miners, tech and automakers” saw the largest drops in European stocks.

China, of course, imports nowhere near $250 billion, let alone $450 billion in goods from the U.S. each year that it could tax in retaliation. Total imports of American goods into China were worth less than $170 billion in 2016, according to the USTR.

So China is threatening “qualitative measures” (质量型的措施 zhìliàng xíng de cuòshī), in addition to quantitative ones — i.e., tariffs — according to a statement (in Chinese, in English) by the Chinese Ministry of Commerce. The economists at Trivium explain what that could mean:

  • Slow American imports via lengthy customs inspections
  • Disrupt production for American companies in China
  • Increase the scale and frequency of penalties for American companies
  • Slowing licensing and other approvals for American businesses
  • Restrict tourism to the U.S.

Other possibilities could stretch as far as an unofficial boycott on U.S. goods, similar to how China punished South Korea throughout much of last year (relations have recently improved again). The New York Times highlights the case of Apple (paywall), which has attained remarkable success in the Chinese market under the leadership of Tim Cook, but which worries that “the Chinese-bureaucracy machine is going to kick in,” and that China will “cause delays in its supply chain and increase scrutiny of its products under the guise of national-security concerns.”

Trump wrote in his statement, “These tariffs are being imposed to encourage China to change the unfair practices identified in the Section 301 action with respect to technology and innovation.” Read that whole Section 301 report here, and an analysis of that report and one of its principal targets, the Made in China 2025 initiative, on Macro Polo and at the Council on Foreign Relations.


Previously in SupChina’s trade war coverage:

Trade war update: ‘an unfortunate sound bite’

Lucas Niewenhuis

Lucas Niewenhuis is an associate editor at SupChina who helps curate daily news and produce the company's newsletter, app, and website content. Previously, Lucas researched China-Africa relations at the Social Science Research Council and interned at the Council on Foreign Relations in New York. He has studied Chinese language and culture in Shanghai and Beijing, and is a graduate of the University of Michigan.