The trade war between the United States of America and China has further intensified. On Friday, Beijing announced that it would be imposing a new round of tariffs on U.S. goods amounting to about $75 billion.
For the past year and a half, the U.S. and China have found themselves in a trade war. As they are two of the world’s biggest economies, this trade war has affected markets around the world. It has also played a role in the slowdown of the global economy. Economists fear that this would set off a recession.
In his response the latest announcement from China, President Trump said on Twitter: “We don’t need China and, frankly, would be far better off without them.”
The U.S. President also “ordered” American companies to “to immediately start looking for an alternative to China.”
The new tariffs from the Chinese government are Beijing’s response to Washington’s declaration of imposing a 10% tariff on Chinese imports amounting to $300 billion. China’s retaliatory move will come in two rounds.
In a statement, the Chinese State Council said: “In response to the measures by the U.S., China was forced to take countermeasures.”
The first round will start on September 1 with the implementation of 5% or 10% tariff on US imports. The second round will follow on December 15 with the resumption of a 25% tariffs on US imports of automobiles and 5% on automobile parts. Back in December 2018, the tariff for automobiles has been reduced to 15% after progress between the two countries were made at the G20 summit.
The US was supposed to implement tariffs on Chinese goods starting September 15. However, half of these tariffs have been postponed until December. According to U.S. President Donald Trump, the delays in the tariff would stop any impact on Christmas holiday shopping.
The delays would affect certain categories including electronics, clothes, shoes, and toys. There are also items under baby products, chemicals, sports equipment, and food and kitchen that are included in the deferred tariff.
With China’s pronouncements of its latest tariff imposition on U.S. goods, the Dow went down to around 1.6% or as much 400 points. The Dow was not the only one that slipped. The S&P 500 and Nasdaq also fell to 1.5%.
The on-going trade war between the U.S. and China have affected both countries. In China, economic growth has slowed down. It has declined to its lowest in 27 years. There has been a rise in unemployment and a decline in factory output.
As for the United States, the manufacturing sector has felt the effects of the conflict with China. The manufacturing purchasing managers’ index has fallen. In July, it was at 50.4 but it’s now down to 49.9. This is the first time in about a decade that the indicator has fallen below 50.
There has also been a significant decrease in the sales of U.S. exports. The decrease has been the fastest one recorded since August 2009. If exports fall, this means that there would be production cuts and reduction of inventory. These can lead to job cuts.
Amid the trade war between the two countries, American consumers, whose spending drives 70% of the U.S. economy, have not been largely affected. However, according to a new analysis by J.P. Morgan, that’s about to change.
With the most recent round of tariffs that the U.S. has imposed on China, Americans would be seeing an increase in the costs per household. The latest tariffs would affect capital and consumption goods.
It is estimated that there would be around a $400 increase per household. This is in addition to the average cost of $600 that American households have absorbed due to the existing Chinese tariffs. It is expected that the tariffs would affect the everyday American shopper.
It is estimated that there will be an increase in the prices of goods particularly shoes and clothing. Apart from these, the tariffs would also affect a household’s grocery budget. There is a significant amount of food being sold in American supermarkets that are linked to Chinese suppliers.