Total Trade War: U.S. Threatens Tariffs On $200 BN of China Goods

The Trump administration escalated its trade dispute with China on Tuesday, saying it would impose tariffs on roughly $200 billion worth of Chinese fish, petroleum, chemicals, handbags, textiles and other products if Beijing does not change its trade practices. The threat comes just days after President Trump imposed levies on $34 billion worth of Chinese goods, including robotics, airplane parts and ball bearings. Mr. Trump has said he is prepared to tax as much as $450 billion worth of Chinese products. In same time, China accused the United States of bullying and warned it would hit back after the Trump administration raised the stakes in their trade dispute, threatening 10 percent tariffs on $200 billion of Chinese goods.China’s commerce ministry said on Wednesday it was “shocked” and would complain to the World Trade Organisation, but did not immediately say how it would retaliate. In a statement, it called the U.S. actions “completely unacceptable”. The foreign ministry described Washington’s threats as “typical bullying” and said China needed to counter-attack to protect its interests. “This is a fight between unilateralism and multilateralism, protectionism and free trade, might and rules,” foreign ministry spokeswoman Hua Chunying told a regular briefing on Wednesday.

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Ultimately with tit for tat measures - all prices globally go up circa 10 per cent.  This is a big risk and whilst it may look tough and headline grabbing it’s gonna damage both, the US and the global economy.

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Des Moines register headline last month: "China tariffs on U.S. soybeans could cost Iowa farmers up to $624 million".....

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Yep. Generally, U.S. soybean prices have fallen about 12 percent since March, 2018 when the U.S.-China trade dispute began.

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5 minutes ago, Petar said:

Des Moines register headline last month: "China tariffs on U.S. soybeans could cost Iowa farmers up to $624 million".....

Looks bad. This could be a repeat of the Mid-80's Farm Crisis. Big Agra is going to swoop in and will be buying plots by the bushel, pun intended.....

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Interesting facts! 
Since Jan 2018 alone, Trump has imposed new tariffs on

$10 bn solar/washers
$48 bn steel/aluminum
$34 bn on China

+$16 bn more on China upcoming
+$200 bn more on China announced yesterday
---------
  = $308 bn of US imports

  = 13% OF US TOTAL IMPORTS!!! 

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It would be interesting to hear "official/expert" solution to balance the U.S. deficit of payments with the Chinese.  As we know since joining the WTO, the deficit has skyrocketed. Export more and figure out how to make your goods cheaper and better than Chinese goods. Remember that people buy Chinese products in the US because they are cheaper. That is hard to achieve due to production costs in the US....

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12 minutes ago, CMOP said:

Of course - wouldn't expect anything less. 

Well I cant say I'm shocked B|

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It is still a numbers game. China will run out of imports to slap tariffs on.  The US only exported $130 billion to China last year. China exported $505 billion last year to the US. Trump can keep on slapping tariffs on China even after this latest $200 billion imports batch done by Trump. Where is China going to go? They have run out of imports to slap tariffs on.  It is a matter of time China will negotiate with their biggest customer in the world. Trump has the ace card specially at this time with Unemployment rate at record 18 year low and the economy booming in the second quarter 2018.

 

 

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(edited)

18 hours ago, RDL said:

It is still a numbers game. China will run out of imports to slap tariffs on.  The US only exported $130 billion to China last year. China exported $505 billion last year to the US. Trump can keep on slapping tariffs on China even after this latest $200 billion imports batch done by Trump. Where is China going to go? They have run out of imports to slap tariffs on.  It is a matter of time China will negotiate with their biggest customer in the world. Trump has the ace card specially at this time with Unemployment rate at record 18 year low and the economy booming in the second quarter 2018.

 

 

All true.  The difference is that the Chinese are prepared to levy much higher tariffs than the US is.  I think that the levy on Soybeans is set at 40% (?).  That effectively shuts US producers out of the market. What China can and will do is make the levies on US manufactured goods so high that they cannot be sold - in essence building the Great Wall of China right across the Port of Shanghai.  And China can hit the one sensitive spot that would really upset the US:  Boeing.  the  Chinese air-travel market is really taking off, with high demand for airplanes.  I recall reading that China convinced Boeing to share building and design technology so that China could get into the airframe manufacturing business, and it has, with their company COMAC introducing the C919 airliner, vaguely like the Boeing 737.  First flight was in 2017, and some 785 planes have either been built or are on order.  China wants to be a big player in the commercial aviation market. 

Meanwhile Boeing sold $11 Billion in planes to China in 2016 alone.  Shutting Boeing out of that market will seriously hurt.  Can China do that?  Of course they can.  What China cannot build, they can go buy from Airbus.  

The biggest single importer of Chinese goods is Walmart - some $60 billion a year.  Is Trump prepared to see WalMart shut down?  Trump is limited in how high he can put tariffs.  China is not. And therein lies the capacity to inflict pain. 

Edited by Jan van Eck
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7 hours ago, jpZelabal said:

Remember that people buy Chinese products in the US because they are cheaper. 

You will find that many many goods available in the USA that are made in China have no US production equivalent.  All the business moved to China and there is zero US domestic production, so the price is no longer even a factor, it is either the Chinese product or NO product. 

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It is a no win proposition for China. Withdrawing $500 billion from the Chinese economy is tantamount to shutting down one sixth of your export market. I'm Chinese and I know that what the present government emphasizes- tranquility, orderly maintenance of status quo and minimal disruption to the economic prosperity sweeping the country.  At the bottom line the Chinese government is a giant business corporation that will act like any business corporation. Avoid fights and disruptions.

Further why would a business entity fight incessantly with its biggest customer in the world? One would undoubtedly accommodate, negotiate an amicable settlement. All these tit for tat are simple posturing for a better deal down the road. The US' position is being tested. If Trump ratcheted it further, China will relent. It does not make sense not to. Its present businesses are heavily leveraged and the deterioration of their biggest export market will exacerbate the inability of these businesses to pay their creditors and invariably plunge the economy into recession.  Have you seen the Shanghai index, the Hang Sheng index lately? Both have lost a quarter of their high in January 2018 when news of tariff threats surfaced. They are also near half of the high achieved in 2016.  In contrast, we are still operating near our highs in Nasdaq and Dow Jones indices. What is the message then being sent by the markets? The US will prevail in this fight in the end.

It is definitely false to declare "No Chinese product or No product". Most US multinationals have diversified their sources from China in particular the low end of the product spectrum like they did a decade ago from Taiwan,S Korea or two decades ago from Japan. China's labor costs have become expensive in contrast with the other developing countries.  Most consumer electronics are now made in random places like Sri Lanka, Philippines, Thailand,Malaysia and the bulk in Mexico. Most garments of Walmart come from random places like Jordan, Ruwanda,India, Pakistan, South Africa,Philippines, Indonesia, Thailand, Cambodia, Laos etc. Nike for instance has steadily cut back its dependence on China by setting up huge manufacturing factories in Vietnam, Philippines, India and Cambodia.

Yes, the US is still dependent on China for a huge number of products. But supply chains can easily be moved or restructured. The multinationals thrive on such changes and will most certainly take advantage of such changes.  Most developing countries on the other hand will welcome such changes.

Walmart like every other business entity will adjust. But China will not wait for the outcome to come to this. It will negotiate like a shrewd businessman. 

 

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14 hours ago, jpZelabal said:

since joining the WTO, the deficit has skyrocketed

So do you think this is a result of correlation or causation?  

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I think we need to always keep in mind that Trump is a provoker, not an actor per se. So when we consider all of this we need to consider that first and foremost. 

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How China has taken advantage of the WTO, and how it has worked for much of the rest of the world, are two different beasts. I've thought our trade policies with China has been nuts for years. China's interests have also been served by many US business interests, whose interests aren't aligned with the general population. Maybe Lenin was right about hanging the last capitalist with the rope they sold us. The US can still hurt China badly, but they can hurt us more. Nothing legal, but still a serious Monty Python flesh wound oh brave Black Knight.

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