US-China Trade Battle Hits Global GDP as Negative for 2-3 Years
United States and China have agreed to resume trade talks - Photo by GettyImages

JAKARTA (TheInsiderStories) – United States (US) President Donald Trump has escalated the trade war with China by announcing plans to hike the tariff imposed on US$200 billion of Chinese goods from 10 percent to 25 percent starting this Friday (05/10). The president announced the move on Sunday at his twitter account.

He also threatened to impose tariffs on all Chinese trade with America, a move that could further destabilize relations between the two economic powers. The move is a blow to hopes that Washington and Beijing could be nearing a deal to end the trade dispute that began last year.

He complained that negotiations between the two countries were proceeding too slowly. He tweets: “For 10 months, China has been paying Tariffs to the USA of 25 percent on 50 Billion Dollars of High Tech, and 10 percent on 200 Billion Dollars of other goods.”

The move will affect more than 5,000 products made by Chinese farms and factories, from fresh and frozen food to chemicals, textiles, metalwork, building materials, electronics, and consumer goods.

Trump originally imposed a 10 percent tariff on these goods last September in an attempt to cut America’ trade deficit with China and force concessions on issues such as intellectual property rights. It had been scheduled to jump to 25 percent in January but the president held back while talks between the two sides continued.

Currently, almost half of China’ sales to America are affected by tariffs and Trump is now aiming for the remaining $325 billion. He warned: “325 Billions Dollars of additional goods sent to us by China remain untaxed, but will be short, at a rate of 25 percent.”

He continued, “The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”

Such a move could cause further pain and disruption to the Chinese economy, and probably trigger retaliatory action by Beijing. Economists have blamed the US-China trade war for a slowdown in global growth in recent months.

The US treasury secretary, Steven Mnuchin, and trade representative, Robert Lighthizer, held talks with China’ vice-premier, Liu He, in Beijing last week. Liu was expected back in Washington DC within these days.

Despite Trump’ claim that China pays these tariffs, they are actually paid by US companies when they import goods. Those firms can choose to pass the cost on to their customers through high prices, absorb the cost and lower their profits, or try to negotiate the cost of the goods down. There was no immediate reaction from China about Trump’s announcement.

Washington and Beijing have engaged in reciprocal tariff hikes over the last year while negotiators have engaged in lengthy trade talks, alternating negotiations between the two capitals. Trump and Chinese President Xi Jinping had agreed on last December to forestall new tariffs while the talks were going on, but it was not clear how his announcement would affect the negotiations, set to resume in Washington on Wednesday.

Despite an initial goal of finishing by March 1, the two countries have continued to debate several issues, but have yet to complete a deal. Both sides, representing the world’s two biggest economies, have said progress is being made.

The two countries have been trying to resolve disputes over intellectual property theft and forced technology transfers. It is not clear whether the tariffs both countries have imposed will remain in place if an agreement is reached.

Moreover, Canada is now depending on the US to help settle a dispute with China, which has started to block imports of vital Canadian commodities, followed the detainment of Huawei Technologies Director Meng Wanzhou, last December.

China halted Canadian canola imports and last week suspended the permits of two major pork producers. After Meng’ Vancouver arrest, Chinese police also detained two Canadian citizens. She, who is under house arrest at her Vancouver mansion, next appears in court on May 8 ahead of an extradition hearing, in a process that could take years.

Canada has launched a full-court press in Washington, which is negotiating its own trade deal with Beijing. US State Department said it was “concerned” by the canola ban.

In March, the Foreign Relations Committee responded to Canada’ concerns by passing a bipartisan resolution supporting the country. Canada says the US is obliged to help, given that the US arrest warrant triggered the crisis with Beijing.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com