WASHINGTON - President Donald Trump just imposed tariffs on hundreds of Chinese products — from X-ray tubes to incinerators. And Beijing is striking back by targeting U.S. soybeans, beef, seafood and other products.
The punch-and-counterpunch announced Friday in Washington and Beijing moved the world’s two largest economies perilously near a trade war that would inflate prices for consumers, disrupt the flow of goods and perhaps slow a global economy that has been enjoying its healthiest expansion in a decade.
“Everybody loses in a trade war,” says Philip Levy, senior fellow at the Chicago Council on Global Affairs and a former White House economic adviser. “You get consumers who are worse off. You get producers who are worse off, farmers who are worse off and you don't even achieve your goal.”
What’s more, the China tariffs come just as the United States is sparring with close allies like the European Union, Canada and Mexico in a separate conflict over trade in steel and aluminum.
The White House on Friday announced plans to slap 25 percent tariffs on more than 1,100 Chinese products, worth $50 billion a year in imports. The administration had originally proposed the tariffs in April, starting with a list of 1,333 Chinese products lines. After receiving public feedback, it removed 515 from the blacklist and added 284 others.
Starting July 6, the U.S. will tax the 818 products, worth $34 billion a year in imports, that remained from the original list. It won't target the 284 additions, worth $16 billion, until after it collects public feedback.
Beijing immediately said it would retaliate with penalties of the same scale on American goods — and it spelled out details to impose tariffs on 545 U.S. exports, including farm products, autos and seafood.
“The Chinese side doesn't want to fight a trade war, but facing the shortsightedness of the U.S. side, China has to fight back strongly,” the Chinese Commerce Ministry said in a statement. “We will immediately introduce the same scale and equal taxation measures, and all economic and trade achievements reached by the two sides will be invalidated.”
American soybean farmers, who send about 60 percent of their exports China, are especially worried about Beijing’s retaliation. Soybean prices were already falling before Friday’s announcement.
“Prices will likely drop further should the tariffs be imposed,” says Bill Shipley, president of the Iowa Soybean Association. “This will further pressure agricultural families and businesses already struggling with below break-even commodity prices.”
Tariffs are a tax. So they drive up the price of targeted imports. The reduced foreign competition means that domestic producers can raise their prices, too.
The Trump administration has sought to protect consumers from a direct impact from the tariffs. The tariffs target mainly Chinese industrial machinery, aerospace parts and communications technology; they spare such consumer goods as smartphones, toys and clothes that Americans purchase by the truckload from China. Televisions and pharmaceuticals were removed from the original tariff list.
Still, these tariffs will impose higher costs on U.S. companies that use the equipment. And over time, those costs could be passed on to consumers. The impact won’t be as visible as it would be if consumer products were taxed directly.
By contrast, the Trump administration earlier this year imposed steep tariffs on imported washing machines. By May, the cost of laundry equipment had jumped 17 percent from two months earlier, according to government data.
The United States accuses China of using predatory tactics in a breakneck effort to supplant American technological supremacy. Among these are outright cyber-theft. Beijing forces U.S. and other foreign companies to hand over technology as a price of admission to the vast Chinese market. And it uses Chinese government money to outbid private companies for U.S. technology at above-market prices.
U.S. officials say they fear that Beijing’s long-range development strategy, dubbed “Made in China 2025,” will hamper competition and hurt American competitors. It calls for creating Chinese global competitors in such areas as information technology, robotics, aerospace equipment, maritime engineering equipment, electric vehicles, biopharmaceuticals and medical devices.
Foreign business groups have complained for a decade that Beijing is squeezing them out of promising economic fields. They say “Made in China 2025” appears to leave them little or no place in those industries.