Tit for tat tariffs escalate trade tensions between US and China

Both the US and China have increased trade tariffs between the two countries, escalating tensions and increasing world market jitters. However Donald Trump says it isn’t a trade war, and the US Commerce Secretary has said that talks are possible.

This looks a bit like a repeat of Trump tactics – to talk big (in this case he has said that trade wars are good and he would win), to throw US weight around to provoke things, then pull back to talks. Similar to his approach to the North Korean problem, and also his approach to renegotiating NAFTA.

It hasn’t been particularly successful on NAFTAS yet, and his big talk and quick withdrawal from the Trans-Pacific Partnership may have back-fired with the eleven other countries ignoring him and doing a deal without him (with the US subsequently suggesting they may consider joining the now CPTPP).

Bloomberg: China’s Counterpunch to Trump’s Tariffs Sparks Global Selloff

Earlier on Wednesday, China said it would levy an additional 25 percent levy on about $50 billion of U.S. imports including soybeans, automobiles, chemicals and aircraft. The move matched the scale of proposed U.S. tariffs announced the previous day. The U.S. is allowing 60 days for public feedback and hasn’t specified when the tariffs would take effect, leaving a window open for talks.

The Trump administration indicated it’s willing to negotiate with China on escalating frictions between the world’s two biggest economies, helping to ease fears among investors of a tit-for-tat trade conflict.

U.S. Commerce Secretary Wilbur Ross said China’s response isn’t expected to disrupt the U.S. economy. In an interview on CNBC on Wednesday, he said China’s reaction “shouldn’t surprise anyone.” He said the U.S. isn’t entering “World War III” and left the door open for a negotiated solution.

“Even shooting wars end with negotiations,” Ross said.

Mixed signals about wars there. And typically garbled tweets:

I wouldn’t be sure about that. Financial and labour markets can always get worse.

U.S. stocks opened sharply lower, but recovered as investors speculated that the flurry of tariffs may not do much damage to the global economy.

Halfway through the afternoon on Wall Street the Dow Jones has mostly recovered from an initial drop of a couple of percent. The market has been volatile so far this week.

Investors are weighing the risks of a trade war, with the Trump administration’s latest offensive based on alleged infringements of intellectual property in China. The U.S. is targeting high-tech sectors that Beijing sees as the future for its economy.

While the China retaliation was more “belligerent” than expected, Beijing probably wants to de-escalate tensions by underscoring what’s at stake for both sides, Oxford Economics director of global macro strategy Gaurav Saroliya said in a research note. “Negotiations will probably lead to less disruptive outcomes for both sides,” Saroliya wrote.

Also from Bloomberg: Trump Wanted a Trade War. Here’s What One Looks Like

In a two-week span, President Donald Trump ordered up an array of tariffs against numerous countries, blocked Chinese takeovers of U.S. companies and sought new restrictions on future Chinese investment. China responded with tariffs of its own on imports of 128 U.S. goods. Economists are warning that the world is on the verge of an all-out trade war, featuring tit-for-tat reprisals, heated rhetoric and appeals to the World Trade Organization, which may be ill-equipped to respond.

And a Bloomberg reference:

  • The full list of Chinese imports that will be subject to new U.S. tariffs.
  • QuickTake explainers on Trump’s claim that China stole U.S. intellectual property, the 1962 law Trump cited for his steel tariffs, the difficulty of the U.S. quitting Nafta and Trump’s solar-panel tariffs.
  • Canada and Mexico got a reprieve from the new tariffs.
  • Bloomberg Economics says an all-out global trade war could cost economies about $470 billion by 2020.
  • How China can punch back.
  • The “nationalists” are back in power in Washington.
  • Why Trump’s steel and aluminum tariffs might set a bad precedent.
  • China stands to gain from Trump’s steel tariffs, Michael Schuman writes in Bloomberg View.
  • How Trump’s tariffs could aim for China but hurt U.S. allies more.
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12 Comments

  1. David

     /  April 5, 2018

    China has been pretty overt with its trade barriers and restrictions and countries have been happy to play along for access to a billion consumers so sooner or later someone has to call time, its worked with South Korea recently who were pretty bad too.
    China needs to worry about more than tariffs into the US as it has a large base of intermediate manufacturers of parts and components which could be transplanted back to the US mainland. No one wants their supply chain disrupted. China isnt as cost competitive and has been losing ground to places like Vietnam for a while, I think the Chinese will blink first as they are on this path of easing trade barriers and restrictions.

    Reply
    • Blazer

       /  April 5, 2018

      The main threat to the U.S is the move away from its currency as the default unit for international commerce.The petro dollars days are numbered.Atm this practice is a subsidy from every other country to the U.S.The implications will impact on Americas debt repayments and ability to print their way out of….trouble.China will use gold to back the yuan and Russia offers barter alternatives for trade.Trump is the new empirical…Nero.

      Reply
      • David

         /  April 5, 2018

        Been hearing the dollar supremacy is about to end for 30 years and no one is ever going back to the gold standard, you are once again so far off topic.

        Reply
        • Blazer

           /  April 5, 2018

          Well about 30 yrs ago coincided with the rise and rise of China as an economic powerhouse.I was under the impression that tariffs were a negative regarding efficient international trade.I am on topic ,you just do not understand the ramifications of U.S hegemony and the building resentment/opposition to…it.

          Reply
  2. Trump is the President of the US and he’s looking after the US and its best interests.

    Reply
  3. David

     /  April 5, 2018

    Trump really is brilliant, he has turned the entire left into avid free-traders!

    Reply
    • Blazer

       /  April 5, 2018

      and turned the free marketeers and globalisation advocates into ….protectionists!

      Reply
      • David

         /  April 5, 2018

        Not at all from what I can see. Show us a free-marketer who supports tariffs…

        Reply
  4. unitedtribes2

     /  April 5, 2018

    According to an article in Breitbart his popularity has risen to 51%. Beats Obama for same time in his cycle. Must be doing something right in the eyes of Americans anyway.

    Reply

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