Published: Tue, September 18, 2018
Money | By Arnold Ball

Trump to impose tariffs on $200 billion in Chinese goods

Trump to impose tariffs on $200 billion in Chinese goods

Larry Kudlow, director of the National Economic Council, speaks to members of the media on June 1 at the White House in Washington, D.C. Kudlow said Monday that President Donald Trump would likely be announcing tariffs on hundreds of billions worth of additional Chinese imports.

After weeks of threats, Trump followed through with 10 per cent tariffs on US$200 billion in imports from China, which take effect Sept 24, and are on top of the US$50 billion already subject to 25 per cent duties.

Trump also warned that if China takes retaliatory action against United States farmers or industries, "we will immediately pursue phase three, which is tariffs on approximately $267bn of additional imports".

Trump defended his policies in an early-morning tweet on Monday, writing: "Tariffs have put the a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country - and yet cost increases have thus far been nearly unnoticeable". Apple Inc. said last month the proposed duties on US$200 billion cover a wide range of products used in its usa operations.

Unlike the $50b in Chinese products that Trump hit in the first tariff wave in July, which fell mainly on industrial goods, Monday's action will affect consumer products such as air conditioners, spark plugs, furniture and lamps.

A senior Trump administration official told reporters that the United States was open to further talks with Beijing, but offered no immediate details on when they may occur.

The US imports around $500 billion in goods from China.

US President Donald Trump on Monday hailed his aggressive use of tariffs as a success for American business, amidst reports he plans to drastically ratchet up the battle with Beijing imminently.

The lack of unity within the United States administration on trade isn't new - Chinese and American officials have held a series of talks over the dispute, and reached at least one agreement which was subsequently abandoned by the president. "I think that kind of tactic is not going to work with China", Fang Xinghai, vice chairman of China's securities regulator, said at a conference in the port city of Tianjin. Then last month, the escalating trade war moved up a gear when the USA brought in a 25 percent tax on a second wave of goods worth $16b.

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With the latest tariff escalation, American consumers could start feeling the cost in everyday goods. "Consumers - not China - will bear the brunt of these tariffs and American farmers and ranchers will see the harmful effects of retaliation worsen". In July, 25 percent tariffs on bearings and some Global Positioning System units took effect, and in August, Chinese-made e-bikes and e-bike motors were hit with a 25 percent tariff.

But there is little prospect of such an outcome because, while the United States is demanding that the trade deficit with China be reduced, the conflict does not merely centre on that issue.

Trump also has complained about America's massive trade deficit - $336 billion a year ago - with China, its biggest trading partner.

China's 'counterattack strategy needs to restrict exports to the United States as well as (imports of) USA goods, ' Lou was paraphrased as saying.

Last month, Mexico and the U.S. finalised a preliminary agreement on a new Nafta pact they intend to sign by Dec 1.

Excluding fuel, import prices rose just 1.3 per cent over the past year, according to the Bureau of Labor Statistics.

China has threatened to retaliate and pull out of negotiations if that happens. "That's good news. At least we did something", he said.

Still, he said, the US economy appears strong enough to withstand the damage. Canada, for instance, imposes high tariffs on some imported dairy products as part of price supports for its farmers. Some companies are looking to move out of China to dodge the tariffs, said Ted Murphy, a partner at the Baker McKenzie law firm.

More broadly, tariffs will lead to higher USA consumer prices, lower overall U.S. economic growth, and other unintended economic consequences.

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