President Donald Trump announced Monday that the United States will impose a 10 percent duty on an additional $200 billion of Chinese imports as of next week, quickly escalating a trade war that has hit broad swaths of the global economy.
“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies,” Trump said in a statement announcing the move. “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices.”
Trump’s latest announcement brings the total amount of Chinese goods hit with tariffs to about $250 billion, or roughly half of the $505 billion that the United States imported from China last year. It also carries through on an announcement his administration made in early July to hit a broad range of Chinese goods with additional levies after Beijing retaliated against an earlier Trump tariff action.
Until now, Trump’s tariffs have mostly been on industrial goods but this latest move will be felt much harder by consumers. Trump also said that a second phase — a boost to the tariff rate to 25 percent — will take place at the beginning of 2019. Such a ratcheting up is likely to make it impossible for U.S. companies that rely on Chinese products to absorb the added costs.
Retailers and many other business groups recoiled at the announcement, which they said would hit consumers in the pocketbook.
“We are extremely discouraged by the administration’s announcement to levy tariffs on millions of products American consumers buy every day,” said Hun Quach, vice president of international trade for Retail Leaders Industry Association. “Tariffs are a tax on American families, period. Consumers — not China — will bear the brunt of these tariffs and American farmers and ranchers will see the harmful effects of retaliation worsen.”
Beijing also warned ahead of Trump’s move that it would respond swiftly. “If the U.S. imposes any additional tariffs on China, we will have to take necessary countermeasures and resolutely safeguard our legitimate and legal rights and interests,” Geng Shuang, a Foreign Ministry spokesman, said during his daily press conference held before Trump’s announcement.
Trump, however, warned Monday that if China takes additional “retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.“ That would encompass virtually all of China‘s exports to the United States.
Some consumer electronics like smart watches and Bluetooth devices were removed from the tariff list, as were bicycle helmets and child safety furniture like car seats, high chairs and playpens, a senior administration official told reporters. Certain chemicals used in manufacturing and in textile and agricultural production were also dropped, the official added.
But other Chinese goods will be subject to an additional 10 percent tax as of Sept. 24, which will likely be passed onto consumers. The products include canned mandarin oranges, rawhide for pets, hair care products, dog leashes and dog collars, luggage, handbags, wrapping paper, gas grills, makeup mirrors, vacuum cleaners, toothbrush replacement heads, razors, air conditioners, toaster ovens, futons, patio furniture, wooden furniture, mattresses and Christmas lights, according to a preliminary list released by the administration earlier this year.
“As a global retailer, Walmart is very concerned about the disruptive impact of these proposed tariffs on our customers and suppliers both in the United States and China,“ the retail giant said in public comments.
A recent study for the National Retail Federation estimated a 10 percent tariff would cost consumers an additional $2.1 billion on purchases of furniture and $578.2 million on purchases of travel goods alone. Raising the duty to 25 percent would increase consumer costs to $4.6 billion on furniture and $1.2 billion on travel goods, the study found.
The tariffs will increase government revenue and help domestic producers, but they are still a “net negative” for the economy because “consumers reduce purchases and pay more for what they do buy,” the NRF study said.
Other industry groups expressed concern over Trump’s latest tariff move.
“This extreme use of tariffs hurts our nation’s access to global markets and threatens many of the 1.3 million good-paying equipment manufacturing jobs our industry supports,” Dennis Slater, president of the Association of Equipment Manufacturers, said.
Trump left one window open for the escalating tariff battle to be addressed — by his personal intervention. “Hopefully, this trade situation will be resolved, in the end, by myself and President Xi of China, for whom I have great respect and affection,” he said in the White House statement. Trump is expected to meet Chinese President Xi Jinping in late November, when both leaders attend the annual G-20 summit in Argentina.
The basis for Trump’s action began over a year ago when Office of the U.S. Trade Representative started an investigation under Section 301 of the 1974 Trade Act which allows the president to impose tariffs in response to unfair trade practices.
After a seven-month inquiry, including a hearing where only a few business groups asked to testify, USTR accused China of unfairly pressuring U.S. companies to transfer valuable technology to do business in its markets and of implementing other “acts, policies, and practices” that harm or discriminate against the United States.
It also highlighted concerns about Beijing’s “Made in China 2025” program, which is aimed at achieving commercial dominance in 10 strategic industries, including advanced information technology; robotics and automated machine tools; aircraft and aircraft components; new energy vehicles; and pharmaceuticals and advanced medical devices.
To that end, USTR initially targeted goods from China’s high-tech sectors in the initial round of tariffs to minimize the direct hit to consumers. But after China retaliated by hitting an equivalent amount of U.S. goods, including many agricultural exports, Trump upped the ante by threatening another $200 billion of Chinese goods.
For its part, China has said it would retaliate on an additional $60 billion worth of U.S. exports, bringing its total to around $113 billion if Trump proceeds. It will target more than 5,200 types of goods that it imports including liquefied natural gas and honey.
In a last-minute bid to prevent further tariff escalation, Treasury Secretary Steven Mnuchin last week invited Chinese Vice Premier Liu He to Washington for more talks. However, Trump’s decision to proceed with more tariffs adds uncertainty to that effort. The Chinese Foreign Ministry spokesman cautioned that additional duties do not help discussions.
“The escalating trade disputes serve the interests of neither side” Geng said. “We always believe that dialogue and consultation on the basis of equality, good faith and mutual respect make the only viable way out for the China-US trade issues.”
One former U.S. trade official said she doubted it matters whether the talks take place.
“Trump loves tariffs and he’s not going to let his people make a deal with China. We’ll probably have to live with these tariffs while he is in office,” Christine McDaniel, a senior research fellow at the Mercatus Center, a free-market think tank. “It may be time for multinationals that ship out of China to re-think supply chains if they hope to escape the tariffs.“
A coalition of groups opposed to the tariffs took issue with Trump’s claim that the move will not hurt consumers. “These tariffs are going to be paid for by the working families who drive our economy,” said Jonathan Gold, a spokesman for a group called Tariffs Hurt the Heartland. “Tariffs are taxes, plain and simple. By choosing to unilaterally raise taxes on Americans, the cost of running a farm, factory or business will grow.”