Trump China Trade War
Getting Worse
China said Tuesday it would retaliate for President Trump’s latest tariff salvo, risking further U.S. trade actions that could result in what some analysts are calling an economic Cold War.
By next week, the United States and China appear likely to be on the brink of slapping tariffs on their entire goods trade, which exceeds $635 billion annually.
Chinese officials in Beijing said they would meet the 10 percent tariffs that Trump announced Monday on nearly $200 billion in imports with similar measures on $60 billion in U.S. products. If that occurs, Trump has said he will “immediately” begin the process of applying tariffs to all Chinese items entering the United States.
The showdown comes as Chinese officials were preparing to travel to Washington for new talks aimed at resolving the months-old trade dispute. Negotiations earlier this year failed to make much progress and it remains unclear whether Chinese officials will resume bargaining in the wake of the president’s latest escalation.
As hopes dim for an early end to the conflict, the likelihood grows that the two countries are moving toward some sort of commercial divorce. Some analysts anticipate an economic partition reminiscent of the globe-splitting divide between the United States and the Soviet Union following World War II.
“We’re probably talking about a world with two centers: a China-centered economic domain . . . and another centered on the United States,” said Aaron Friedberg, a professor of politics and international affairs at Princeton University, who handled China policy as an aide to Vice President Richard B. Cheney in the George W. Bush administration. “It’s heading toward a bifurcated global economy.”
"That shows you how complex it is to contain the trade deficit," said Torsten Slok, chief economist at Deutsche Bank Securities. "Fares are a small part of the image. There are many other moving parts and the rising dollar offsets some of the effects."
The decline in the Chinese currency will also exaggerate the impact of Chinese retaliatory tariffs, making US goods even more expensive for Chinese customers.
"American exporters are doubly beaten by China's retaliatory tariffs and dollar appreciation in terms of their competitiveness in Chinese markets," said economist Eswar Prasad of Cornell University, formerly head of China's International Monetary Fund department.
According to Trump's plan, the tariff pain on the $ 200 billion batch of Chinese goods will grow on January 1, 2019, rising from the original 10 percent to 25 percent. If there are no signs of diplomatic progress by then, more companies could switch their orders from Chinese suppliers to factories in countries like Vietnam or India, executives said.
"We have not seen a significant shift in customer supply chains yet, but as the situation continues for a long time, we expect customers to diversify their supply chains, and perhaps some trading patterns are also changing," said Rajesh Subramaniam, executive vice president FedEx, investors last week.
How the President pursues his uncompromising approach to China, Executives grow increasingly frustrated. The United States Chamber of Commerce, the National Association of Manufacturers, and the National Retail Federation were among those who gave the use of Fares costly and counterproductive.
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