Trump tariffs: Higher prices possible for these products

Irving Hamilton
September 25, 2018

Earlier this month, President Donald Trump threatened more tariffs on Chinese goods - another $267 billion worth of duties that would cover virtually all the goods China imports to the United States.

"The door for trade talks is always open but negotiations must be held in an environment of mutual respect", but "cannot be carried out under the threat of tariffs", a state-run Xinhua news agency quoted a statement from its government.

United States tariffs on $200 billion (€170 billion) worth of Chinese goods and retaliatory duties by Beijing on $60 billion worth of USA products took effect after the weekend.

Chinese products hit with fresh United States duties include everything from vacuum cleaners to internet-enabled devices, while USA goods targeted by China include liquefied natural gas and certain types of aircraft.

After accusing the U.S. of launching the "largest trade war in economic history", analysts worry Beijing could shift to threatened "qualitative" retaliatory measures, such as damaging USA firms in China or restricting the export of crucial items to the US.

Defiant in the face of increasing fears about the impact to the U.S. economy, Trump has threatened to hit all imports from China if it refuses to change policies he says harm USA industry, particularly the theft of American technology. A senior White House official said last week the U.S. will continue to engage China, but added there was no date for further talks.

This sets up the possibility of no deal to reduce tariffs before 2019, which would mean Monday's tariffs would jump to 25% on January 1, 2019, further hurting global supply chains and raising prices on U.S. consumers.

The pair of powerhouse economies have already implemented tariffs on $50 billion worth of one another's exports.

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While tariffs have grabbed the headlines, the fight could spill out of direct trade channels. The country could opt to prop up domestic companies hit by the tariffs, organize consumer boycotts, or even block exports of rare earths and other valuable goods to the U.S. According to the report, the U.S. will highlight Beijing's alleged attacks, ranging from election interference to intellectual property theft.

"The measures announced to date look set to push up U.S. core [personal consumption] inflation by around 0.1pp, and about twice that if the next round of China tariffs materializes", the bank wrote.

Any talks would be encouraging, according to Chad Bown, a senior fellow at the Peterson Institute for International Economics. "Until the president himself engages on this very critical question, his administration's only likely outcome seems the costly and destructive path of tariffs".

The latest escalation in the US-China trade war came after China cancelled further trade talks with Washington.

That could be bad news for the USA energy patch, which has taken advantage of a decade-old fracking revolution to become a big supplier of natural gas and crude oil to countries all over the world, including China.

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