Beijing (GPA) – The new tariffs are a sign that China is prepared for Trump’s trade war despite not wanting it.
In the weeks following several changes in US trade policy aimed at China such as new tariffs on steel imports (which only affect .01% of China’s GDP) and an attack on solar panels (a market where China is a powerhouse), Washington was fairly sure of themselves. To Trump and Wall Street it seemed they had both dodged a bullet and China was not going to respond with truly damaging tariffs and only putting initial restrictions on a handful of select sectors of trade with the US.
Today this confidence was broken by an announcement by Beijing that new, more sweeping tariffs would be applied to a spectrum of US products. The list issued by China today adds up to 128 American imports ranging from agricultural products to industrial materials.
These new Chinese tariffs on US exports including foods like pork and fruit, and raw materials such as scrap aluminum, the latest shot in this trade war is likely to punch a several-billion-dollar hole in US markets. Trump has already announced he is considering raising tariffs to as high as 25% on tech products from China.
China’s announcement of the new tariffs has already had an effect on the market and as of Monday night, there have been noticeable declines. Most market averages are down by about 10% from their recent high point – which has now been accelerated by trade worries – with most markets losing several percentage points just today.
The DOW Industrial Average on Monday dropped nearly 400 points (about 1.9%) after having already recently dropped 700 points from Trump’s recent trade threats. The Standards & Poors 500 Index also suffered a loss of around 2.25%, bringing it down an entire tenth since a record high point in late January.
Another part of Monday’s market declines is also the result of further threats of market intervention by the US President himself. One contributing factor to this is, of course, the President’s Twitter account, where he attacked Amazon, helping the company lose about 5% of their value. Tech giants Intel and Tesla also dropped today from fears related to Trump’s statements.
Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country…not a level playing field!
— Donald J. Trump (@realDonaldTrump) April 2, 2018
Compared to what China is capable of, these latest tariffs are still a modest response to US blustering. That said, the latest sanctions on US products do reflect China’s willingness to target some of the most export-reliant industries, primarily agriculture.
The next act of this latest trade war drama is likely to take place later this week when Trump is set to announce the next set of tariffs targeting China. Economists estimate that this newest set of anti-China tariffs are likely to hit the economy between $50 to 60 billion.
If Trump should go forward with this next round of tariffs China is likely to continue to respond in kind and has even scratched the surface of possible measures that could be enacted.
Trump would be wise to reconsider his latest designs and begin restoring relations with China as soon as possible. China is likely to win any trade war with the US but that doesn’t mean that Beijing wants one.
China has shown their commitment to a healthy world market in a statement issued by the Ministry of Commerce (MOC) through the World Trade Organization. In the statement, the MOC said that despite the fact that China’s “interests have been seriously damaged” Beijing still feels “cooperation is the only valid option for China and the United States.” However, the MOC also made clear, that should Trump continue to move towards a trade war, China was prepared “As a WTO member, China has the right not to meet some former obligations to the United States.”
James Carey is an organizer based in Detroit, Michigan, founder of Geopolitics Alert, and an experienced analyst on Middle Eastern affairs with a particular focus on Turkey. He also covers topics ranging from Latin America and Asia to Europe. You can also hear James in his weekly podcast; The Left is Dead which he co-hosts with investigative journalist Jake Anderson.