We Have a Trade War on Our Hands

Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – The United States rushed pell-mell into its first international trade war since the 1980s by doing nothing as its tariffs on $34 billion in Chinese imports took effect at 12:01 a.m. EST on July 6.

True to its word, China immediately struck back and imposed retaliatory tariffs on $34 billion worth of imported U.S., including autos. Agricultural products faced 25 percent tariffs. China said it was forced to retaliate and will match future U.S. import tariffs. The U.S. has threatened to tax over $500 billion worth of Chinese goods, or the total amount the U.S. imported from China in 2017.

“China promised to not fire the first shot, but to defend national core interests and the interests of the people it has no choice but to strike back as necessary,” said the Ministry of Commerce, which also called the U.S. tariffs “a violation of world trade rules.” China said Trump has “initiated the largest-scale trade war in economic history.”

“We can probably say that the trade war has officially started,” said Chen Feixiang, professor of applied economics at Shanghai Jiaotong University’s Antai Colege of Economics and Management. “If this ends at $34 billion, it will have a marginal effect on both economies, but if it escalates to $500 billion like Trump said then it’s going to have a big impact for both countries.”

The People’s Bank of China (PBOC), the country’s de facto central bank, estimates the U.S. import tariffs on $50 billion worth of Chinese goods will cut China’s economic growth by just 0.2 percentage points, but the overall impact will be limited.

The proposed U.S. tariffs will hit many American and foreign companies operating in China and disrupt their supplies of components and assembly work, said Commerce Ministry spokesman Gao Feng.

Foreign companies account for $20 billion, or 59 percent, of the $34 billion of exports from China that will be subject to new U.S. tariffs. U.S. firms accounting for a significant part of that 59 percent, said Gao.

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