US imposes new tariffs on $200bn of Chinese goods

BBC.- The US is imposing new tariffs on $200bn (£150bn) of Chinese goods as it escalates its trade war with Beijing. These will apply to almost 6,000 items, marking the biggest round of US tariffs so far. Handbags, rice and textiles will be included, but some items expected to be targeted such as smart watches and high chairs have been excluded.

The Chinese commerce ministry said it had no choice but to retaliate but is yet to detail what action it will take.

The US taxes will take effect from 24 September, starting at 10% and increasing to 25% from the start of next year unless the two countries agree a deal.

US President Donald Trump said the latest round of tariffs was in response to China’s “unfair trade practices”.

“We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices,” he said.

Mr Trump also warned that if China retaliated then the US would “immediately pursue phase three” and impose further tariffs on another $267bn worth of Chinese products.

Such a move would mean almost all of China’s exports to the US would be subject to new duties.

After opening lower, the Shanghai stock market ended the day 1.8% higher, while Tokyo was up 1.4% and Hong Kong gained 0.6%.

Hasn’t the US already imposed tariffs?
Yes. In fact, this latest round marks the third set of tariffs put into motion so far this year.

In July, the White House increased charges on $34bn worth of Chinese products. Then last month, the escalating trade war moved up a gear when the US brought in a 25% tax on a second wave of goods worth $16bn.

This latest round means that about half of all Chinese imports to the US are now subject to the new duties.

It is also the biggest set of tariffs to date, and unlike the earlier rounds this latest list targets consumer goods, such as luggage and furniture.

That means households may start to feel the impact from higher prices.

US companies have already said they are worried about the effect of higher costs on their businesses and warned of the risk of job cuts.

While economists generally estimate that the tariffs will have little impact on the overall US economy, they have warned that the effects are difficult to predict.

What items have been targeted?
Officials have said they want to shield consumer goods from the taxes as much as possible.

But many everyday items such as suitcases, handbags, toilet paper and wool are included in this latest round of tariffs.

The list also includes several food items from frozen cuts of meat, to almost all types of fish from smoked mackerel to scallops and soybeans, various types of fruit and cereal and rice.

Why are smart watches and high chairs exempt?

The list slated for tariffs originally included more than 6,000 items, but US officials later removed about 300 types of items, including smart watches, bicycle helmets, play pens, high chairs and baby car seats.

The changes come after fierce opposition from US companies including Apple and Dell, which fear the tariffs will increase their costs as many of their products are made in China.

Earlier this month, Apple wrote to US Trade Representative Robert Lighthizer warning that consumers would have to pay more for its products as a result of the proposed tariffs.

At the time, Mr Trump replied with a tweet urging Apple: “Make your products in the United States instead of China.”

Why is the US doing this?
The White House says its tariffs are a response to China’s “unfair” trade policies.

In theory, the tariffs will make US-made products cheaper than imported ones, and so encourage consumers to buy American. The idea is they would boost local businesses and support the national economy.

US officials hope the risk of economic harm will convince the Chinese government to change its policies.

The BBC’s Asia business correspondent Karishma Vaswani said the escalating trade war between the two countries is in part due to a lack of understanding of the other’s position.

“Given the diametrically opposing views Washington and Beijing have of their problems, this trade war is unlikely to get better before it gets worse – for them, or for any of us.”

Many US businesses are critical of the tariffs with farmers, manufacturers, retailers and other industry groups forming a coalition to oppose the tariffs, calling them taxes on American families.

How has China responded?
China have previously imposed tariffs on $50bn of US products in retaliation, targeting their response against key parts of the president’s political base, such as farmers.

The government has outlined a plan to impose further tariffs on roughly $60bn of US goods, and threatened other measures.

Are the two sides talking?
Not really. Talks between high-level officials ended in May without resolving the matter and efforts to restart discussions have failed.

US and China officials had discussed a new round of talks over the past week, but Mr Trump’s latest move is likely to sour relations further.

China is reported to have said it would reject new trade talks if the President imposed the $200bn worth of tariffs on its exports.

US Commerce Secretary Wilbur Ross said on Tuesday it was up to Beijing to take the next steps on talks: “The question about whether or when to have a discussion is very importantly in their ballpark.”

The immediate objective of President Trump’s action against China is to address what he calls the theft of American companies’ technology, but it also plays into his wider concern about the US trade deficit.

He sees it as something that needs to be corrected and as the result of bad trade agreements and unfair trading by other countries.

The trouble is that a trade deficit is generally regarded as being the result of savings and investment decisions rather than trade policy. A country that spends more than it earns has a trade deficit.

President Trump’s other policies include tax cuts that could increase government borrowing, which is equivalent to cutting national saving and could create a bigger trade deficit.

What Mr Trump hopes is that the tax cuts will boost economic activity so much that they will generate more revenue – and “pay for themselves”. That’s another area of economic controversy.

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