Trade war: US to hit China with new wave of tariffs

The US aims to impose tariffs on almost all Chinese imports into the country by the end of 2019 and the Trump administration is already due to impose a fresh tariff of 15% on a range of Chinese goods, in the first of two rounds of the new tariffs.

With the latest imposition of tariffs, the US is expected to hit billions of dollars worth of Chinese products in a sharp escalation of a bruising trade war.

So far, Washington has imposed tariffs on some $250bn of Chinese goods, while Beijing has retaliated with tariffs on $110bn of US products.

Even though the move comes amid heightened tensions between Washington and Beijing, Gao Feng, Commerce Ministry spokesperson of Beijing, said China had "ample" means to retaliate against planned US tariffs while emphasizing the need for both sides to continue trade negotiations to de-escalate tensions.

Businesses are finding it increasingly hard to navigate the uncertainty of the long-running trade dispute over what was initially seen as a dispute over China's allegedly unfair trade practices, is now increasingly being seen as a geopolitical power struggle between the world's two largest economies.

The US government put Huawei on a trade blacklist in May, while US President Donald Trump has tied protests in Hong Kong to a possible trade deal with China.

Analysts say that in view of the latest escalation, the prospect of a resolution looks grim.

"It's difficult at this stage to see how there can be a deal or at least a good deal," said Julian Evans-Pritchard, senior China economist at Capital Economics.

"Since talks broke down back in May, the position of both sides has hardened and there have been other complications, namely the Huawei ban and Hong Kong protests, which have made it even more difficult to bridge the gap."

What is expected on September 1?

By the end of the year, the US is due to impose a staggering 15% tariff on $300bn worth of Chinese goods in two rounds.

The first round of duties is due to be introduced on September 1 and products to be targeted in the first round range from meat and cheese to pens and musical instruments.

Analysts expect this tariff will target imports worth about $150bn.

The second wave of tariffs are projected on goods that include clothing and footwear which are subjected to be implemented from December 15. 

The 15% rate supersedes the 10% originally planned and was announced last week as tensions between the two sides escalated.

China initially said it would retaliate with measures targeting $75bn of US goods, but later appeared to soften those comments.

"The most important thing at the moment is to create necessary conditions for both sides to continue negotiations," he said in a briefing, reports BBC.

How has industry reacted?

Donald Trump has repeatedly argued that China pays for tariffs, but many US companies have rebutted that claim.

The American Chamber of Commerce in China also voiced concerns after the US said it was going ahead with new tariffs.

As per reports, more than 200 footwear firms, including Nike and Converse, said the new duties would add to existing tariffs of up to 67% on some shoes, driving up costs for consumers by $4bn each year.

The incoming tariffs on footwear "will also mean these massive tax increases hit tens of millions of Americans when they purchase shoes during the holiday season".

"Our members have long been clear that tariffs are paid by consumers and harm business," it said in a statement.

"We urge... that both sides work towards a sustainable agreement as soon as possible that resolves the fundamental, structural issues foreign businesses have long faced in China."

What's next?

The Trump administration plans to raise the rates on existing duties from 25% to 30% on October 1 in addition to imposing new tariffs.

Evans-Pritchard from Capital Economics said this rate could increase further still.

"The tariff rate could go all the way up to 45%" 

"Those are the goods that do the most damage to China and the least collateral damage to the US," he said.

Analysts have reported that pressure created by tariffs is also building for not only the Chinese economy but also the US. 

"The full-blown trade war, together with China's retaliation in kind, could reduce potential US GDP growth in the short run by almost 1%," says Gary Hufbauer of the Washington-based Peterson Institute for International Economics.

"The impact on China would be larger, as much as 5%."