The U.S. tariff war with China is heating up and consumers are about to feel an increasing pinch. The Chinese government has announced plans to raise tariffs on $60 billion in U.S. goods. The hikes are expected to kick in on June 1, 2019.
Tariffs, already set at 5-10% will be increased to 25% on select products when the hike goes into effect. China decided to increase prices after Trump announced plans to raise tariffs from 10% to 25% on $200 billion in Chinese products.
U.S. farmers are once again being attacked in the newest round of the trade wars. The Trump administration was forced to provide farmers with subsidies in 2018 when the trade war first started, now, China continued to target the U.S. agri-business with tariffs against peanuts, sugar, wheat, chicken, and turkey, among various other items.
China’s Global Times’s editor in chief, Hu Xijin tweeted on Monday that Beijing may completely abandon buying US agricultural products and slash Boeing orders, both of which would be a major blow to the U.S. economy.
China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China. Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.
— Hu Xijin 胡锡进 (@HuXijin_GT) May 13, 2019
The increase is tariffs arrive after China withdrew support for various parts of the developing trade deal with the United States.
Trump has promised the trade war will “only get worse!” if China doesn’t agree to fight intellectual property theft and other sticking points.
Trump wrote to China’s President Xi Jinping, “You had a great deal, almost completed, & you backed out!”
As we’ve seen with Trump’s other trade war actions, investors were wary during pre-market trading on Monday morning with U.S. auto-makers hit particularly hard.
The BBC notes that Trump’s own economic advisor Larry Kudlow has been at odds with the President, noting that “both sides will suffer” from an increasing and prolonged trade war.
Economic uncertainty is also extending into the tech market where Apple has continued to experience stock price drops.
China says it's going to raise tariffs on 2,493 U.S. goods, up to 25%, starting June 1. Apple shares fall further pre-market, down more than 3% after falling 9% last week. https://t.co/VK9eiq1ZcF pic.twitter.com/tOROVRItUB
— Lisa Abramowicz (@lisaabramowicz1) May 13, 2019
Trump has argued that Chinese firms would simply cut their prices to compensate for his ill-advised trade-warn. Instead, a note from Goldman Sachs has found that Trump’s initial tariffs, which targeted $250 billion of Chinese goods, have led to a price increase that has fallen “entirely” on American households and businesses.
According to a Goldman Sachs analyst:
“One might have expected that Chinese exporters of tariff-affected goods would have to lower their prices somewhat to compete in the US market, sharing in the cost of the tariffs.
“However, analysis at the extremely detailed item level in the two new studies shows no decline in the prices (exclusive of tariffs) of imported goods from China that faced tariffs.”
Despite analyst and other expert claims pointing to an ill-advised trade war, Trump is sticking to his guns, promising further action against China during an early Monday morning tweetstorm.
If President Trump is hoping for a quick retreat from China he’s likely in for a world of hurt. China’s state-run TV downplayed his threats on Monday and said China was not in the least concerned about the President’s actions.
According to Reuters:
State television said…that the effect on the Chinese economy from the U.S. tariffs was “totally controllable”.
“It’s no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger.”
A second editorial from China’s state-controlled “People’s Daily” reads:
“China has been pushing forward the bilateral talks with a high sense of responsibility and maximized sincerity, but it will never yield to the extreme pressure from the U.S., or compromise on matters of principle.”
Given the firm stance of both countries, things could become increasingly uncomfortable for American consumers throughout 2019 and well into 2020.
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James Kosur is the former Editor-In-Chief and co-founder of Hill Reporter. He recently served as an editor for Business Insider and various other publications. James and his partners sold Hill Reporter to a new owner in July 2019.