Published: Sat, July 07, 2018
Markets | By Erika Turner

Charting the US-China trade battle

Charting the US-China trade battle

"China is forced to strike back to safeguard core national interests and the interests of its people", the country's Commerce Ministry said in a statement after United States tariffs kicked in just after midnight ET, which is noon in Beijing. The motorcycle company announced last month it would move production out of the U.S.to get around the EU's retaliatory tariffs.

The US penalties became a reality at just after midnight in Washington, which in Beijing was just past noon (July 6).

The tariffs mark some of the first material movements toward a trade war between the world's largest economies.

And Beijing's tactics may go beyond tariffs to include arbitrary quarantines and a costly uptick in customs inspections.

Washington increased tariffs at 12:01 a.m. ET on $34 billion United States worth of Chinese imports, a first step in what could become an accelerating series of tariffs.

The powerful US Chamber of Commerce, a principal corporate lobby, said this week that retaliation from China, Canada, Mexico, the European Union and others against Trump's tariffs was already affecting $75 billion in US exports - much of this from states that had narrowly supported Trump in 2016's presidential elections.

It's not merely a tit-for-tat tariff exchange, but something more fundamental.

At the stroke of midnight Washington time, the U.S. pulled the trigger on 25-per cent duties on about US$34 billion in Chinese machinery, electronics and high-tech equipment, including autos, computer hard drives and LEDs.

As per latest updates, the USA has planned to go ahead with additional tariffs worth United States dollars 16 billion on Chinese imports coming summer. "So we have 50 plus 200 plus nearly 300".

The first round targets Chinese industrial goods, not consumer products, in an attempt to limit the impact on US households, but companies that rely on Chinese-made machinery or components may eventually have to pass along increased costs to customers.

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The Chinese authorities have imposed 25% duties on imports from the United States worth about $34 bln a year, according to a statement by the Main Customs Administration of the People's Republic of China.

Shaun Rein, managing director at the China Market Research Group in Shanghai, said the Chinese government's next play could be to stoke anti-American sentiments among consumers - similar to the boycotts it ordered past year on South Korea's Lotte Group, which caused dozens of the company's convenience stores to shutter.

"Once these tariffs start going into effect, it's pretty clear the conflict is real", said Robert Holleyman, former deputy U.S. trade representative under President Barack Obama and now a partner at law firm Crowell and Moring. "To put it simply, the U.S.is opening fire on the entire world, including itself", he said.

He argues that China should purchase more American goods, and has blamed trade with Beijing on the loss of American jobs throughout the Rust Belt.

"The US has provoked this trade war". But after three rounds of negotiations between the two sides, including a Chinese pledge to significantly increase purchases of American products, Trump made a decision to go ahead with the tariffs. Some have responded by hiking their own tariffs on US goods.

USA carmaker Ford Motor Co said on Thursday it has no plans to hike retail prices of its imported Ford and Lincoln models in China, despite the steep additional tariffs on imported USA vehicles set to come into play on Friday.

For the time being, analysts say it's hard to see Washington or Beijing backing down in the dispute.

BMW said it could not absorb all of the 25% tariff on the cars it exports to China from a plant in Spartanburg, South Carolina and would have to raise prices.

Cohen says while China does export more to the USA, the United States could lose in other ways.

The two giant economies appear ready to see which side can endure the most pain.

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