Home America US-China trade war: New tariffs come into force

US-China trade war: New tariffs come into force


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US President Donald Trump’s trade war against China has moved up a gear as it brings in a 25% tax on a second wave of goods worth $16bn (£12.4bn).

The move ratchets up the dispute which began in July. The US imports far more goods from China than it exports to it.

There are fears that more tariffs could cause further damage to companies and consumers. Goods affected this time include motorcycles and aerials.

China immediately imposed retaliatory taxes on the same value of US products.

These will cover US goods including coal, medical instruments, cars and buses.

China also says it plans to file a fresh complaint against the tariffs at the World Trade Organization (WTO), which adjudicates in global trade disputes.

China’s commerce ministry warned of a “counter-attack” after Washington imposed the tariffs, saying it “clearly suspected” the US of violating WTO rules.

It filed an initial complaint at the WTO in July as Mr Trump imposed his first round of tariffs.

The tit-for-tat tariffs come as officials from the US and China hold low-level talks in Washington, but hopes are not high that they will bring the dispute to an end.

As well as China, Mr Trump has imposed taxes on Mexico, Canada and the EU, to encourage consumers to buy American products. All of those countries have retaliated.

This second round of tariffs comes despite testimony to the US Trade Representative’s Office by dozens of US companies and industry groups.

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President Trump has taken an aggressive stance on trade with China

Many said the new tax would hurt their businesses and warned that they would not be able to absorb another tax without raising prices for US consumers.

However, the $16bn is a drop in the ocean compared with the amount that Mr Trump has indicated could be hit.

The president said in July that he was ready to tax all of the $500bn worth of Chinese imports into the US.

Grim outlook for the region

Karishma Vaswani, Asia business correspondent

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Media caption“We have to be prepared for the worst”

What hurts Beijing can also hurt countries further afield.

Many goods that are needed for final assembly in China actually come from other South East Asian countries such as Malaysia and Indonesia, and go through Singapore to have some other products added on.

Economists say that means some countries in the Asia-Pacific region could see as much as a percentage point shaved off economic growth.

International trade is what has helped Asia turn itself from an economic backwater into one of the most dynamic and fast growing areas in the world. It’s lifted millions out of poverty.

But if this trade war continues, the outlook could be far more grim.

The US has threatened a third round of tariffs on an additional $200bn of Chinese goods. These could come as soon as next month.

It has since said those products could be hit with a 25% levy – more than double the 10% originally planned.

China has said it would respond with another tariff on $60bn of US goods.

But it would be harder for Beijing to match the US threat, because its manufacturers export far more products than American businesses send to China.

The US Trade Representative’s Office is holding hearings this week on the likely impact of more tariffs.

China has previously accused the US of “unilaterally” heightening tensions between the two economic giants.

There are signs that the trade war is already having an impact.

Major carmakers recently warned that changes to trade policies were hurting performance.

The International Monetary Fund said last month an escalation of the tit-for-tat tariffs could shave 0.5% off global growth by 2020.

Iris Pang, Greater China economist at ING Wholesale Banking in Hong Kong, said that as US imports from China were mostly consumer goods, US consumers would suffer from higher prices.

“And Chinese imports from US are usually parts and producer goods, [so] the tariffs would make these more expensive for Chinese manufacturers,” she added.

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