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Global Supply Chain News: US Tariffs on Chinese Imports May be Back, with Threat of Trade War a Concern Again

 

China Plans Retaliatory Tariffs on US Goods with Political Impact In Mind

May 31, 2018
SCDigest Editorial Staff

In recent weeks, there have been many sighs of relief, as the US and China toned down rhetoric and slowed actions relative to trade. For example, the Trump administration in recent days had boasted of a deal under which with tariffs on Chinese imports would be put on hold while negotiators worked on a deal that supposedly would have China reduce its $375 billion annual trade advantage in goods by importing a lot more US-made products.

Supply Chain Digest Says...

In April, China's Ministry of Commerce said that China will fight "at any cost" and take "comprehensive countermeasures" when the planned US tariffs were first announced.


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So much for that idea, it appears. Rather abruptly, the Trump administration has just communicated to Chinese officials that the US was indeed moving forward with plans to apply tariffs on Chinese imports and other actions that would restrict Chinese companies from accessing US intellectual property.

The Trump administration and Commerce Secretary Wilbur Ross said this week that it would announce by June 15 a final list of $50 billion of goods imports from China that would be subject to tariffs of 25%, with the duties implemented "shortly thereafter."

On April 3, Trump unveiled a list of more than 1,300 Chinese exports — which included flat-screen televisions, aircraft parts, and medical devices — that he said he plans to hit with 25 new tariffs.

Following the tariffs will be restrictions on US companies that will be aimed at preventing unfair Chinese acquisition of US technology and IP that would be announced by the end of June. The White House had earlier found Chinese companies and policies were leading to the taking of US intellectual property contrary to global trade law, often as a matter of being able to do business with China.

The tariffs on $50 billion in Chinese imports is the first step in a sequence that the White House said could lead to tariffs on an additional $100 billion in Chinese imports.


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The return to US tariff threats are likely to have caught China a bit by surprise. Just a few days ago, China's economic envoy had called a truce in the simmering trade conflict, saying both sides would put threatened tariffs on hold.

But the US announcement may actually be more a matter of negotiating strategy as opposed to firm plans, as Ross heads to China for trade talks.

"The Trump administration is clearly signaling, ahead of Wilbur Ross's trip to Beijing, that the gloves are off, given China's unwillingness to agree to a trade deficit reduction target or to make broader trade concessions," Eswar Prasad, a Cornell University professor of international trade, told the Wall Street Journal this week.

China as usual reacted strongly to the news that the US tariffs were back on track, vowing to defend its "core national interests."

In April, China's Ministry of Commerce said that China will fight "at any cost" and take "comprehensive countermeasures" when the planned tariffs were first announced.

And China is acting with insight into the US political arena. For instance, China has said it would retaliate to US moves by adding tariffs on US orange juice exports to the country, much of which comes from the battleground state of Florida. And tariffs on corn crops could hit swing states in the Midwest like Iowa.

What's more, William Reinsch of the research organization the Stimson Center says that China could take some unconventional steps to interfere with US companies that rely on supply chains in China. For example, Chinese government officials could delay shipments of iPhones out of China or use regulatory crackdowns to interfere with the manufacturing of components that iPhones rely on. That could make iPhones more expensive and hammer Apple's share price.

How this plays out will create winners and losers, with a lot at stake. Can the US weave a course that does reduce the trade deficit with China without causing a trade war that decreases some US exports and hurts the overall economy?

We should know soon enough.


Are you in favor of tariffs on Chinese imports? Do you think they  will actually be applied? Let us know your thoughts at the Feedback section below.

 

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