President Donald Trump announced last Thursday that the United States would impose a new 10% tariff on $300 billion worth of products imported from China, putting an end to the temporary ceasefire between the trade war of the two economic giants.
Earlier this month, President Trump indicated that he would not push through with imposing more tariffs over China after their meeting during the G20 Summit. In particular, the meeting transpired that both countries are willing to go over trade talks.
Earlier this week even, Trump took to Twitter indicating that the meeting with Chinese officials and the U.S. Trade Representative, Robert Lighthizer, and Treasury Secretary, Steve Mnuchin, was “constructive” when they traveled to Shanghai — furthermore saying that negotiations were scheduled to resume in September in Washington, D.C.
“When my people came home, they said, ‘We’re talking, we have another meeting in early September,’ ” Trump told reporters. “I said, ‘That’s fine, but in the meantime until such time as there’s a deal, we’ll be taxing them.’ “
However, a few days later, Trump announced that he would be imposing an additional 10% on the current tariffs on Chinese imports starting September 1, arguing that Beijing had broken some of the promises it made in trade negotiations.
Currently, there are an imposed 25% tariffs on $250 billion in Chinese imports.
Trump also argued that he was disappointed by the lack of progress in the talks, saying China had failed to follow through on promises to curb the sale of fentanyl and buy more products from U.S. farmers.
“My friend, President Xi, said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die!” Trump said in a tweet.
The new import taxes — which Trump later said could go “well beyond” 25% on a long list of goods — expected to significantly affect products such as smart-phones, laptop computers, and children’s clothing.
Surprisingly, the President ended on a positive note, saying, “We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!”
Upon Trump’s announcement, major U.S. stock indexes fell about 1 percent, and the Dow Jones Industrial Average closed down 280 points, and oil prices tumbled nearly 8 percent.
Trump is insisting that the US will earn more due to higher tariffs for China goods, and will also pressure them to agree on terms regarding trade. However, industry groups said otherwise, indicating that the new tariffs will hurt businesses and fall on consumers.
“We are disappointed the administration is doubling-down on a flawed tariff strategy that is already slowing U.S. economic growth, creating uncertainty and discouraging investment,” David French, vice president of government relations at the National Retail Federation, said in a statement.
“These additional tariffs will only threaten U.S. jobs and raise costs for American families on everyday goods.”
Apart from the US companies suffering from tariff hikes, Chinese companies are also losing business since another logical workaround for paying the tariffs is to source materials outside China.
Apparently, Chinese exporters are not paying the tariff rates alone — U.S. importers also pay a fraction of that rate.
Tariffs are a tax on imported products and are paid by U.S.-registered firms to U.S. customs when goods enter the United States.
In turn, these U.S. imported pass added costs to consumers by raising their prices.
The U.S. retailers called Trump’s move as “another tax increase on American businesses and consumers.”
For example, the tariff costs have increased Caterpillar Inc’s production by $70 million in the last quarter. It expects to pay between $250 million and $350 million in tariffs this year. In response to higher manufacturing costs, the heavy equipment maker has increased prices.
Walmart Inc., the world’s largest retailer, and department store chain, Macy’s Inc., have warned of an increase in prices for shoppers due to higher tariffs on goods from China.
On Wednesday, the Federal Reserve cut interest rates for the first time since 2008 to help U.S. businesses adjust to the changes in global economies.
“Certainly, we’ve seen … that when there’s a sharp confrontation between two large economies, you can see effects on business confidence pretty quickly and on financial markets pretty quickly,” Fed Chairman Jerome Powell said in a news conference after the interest rate announcement.