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Brace Yourself For A Trade War – Trump’s New Tariff Announcement Cuts China Far Deeper

Brace Yourself For A Trade War – Trump’s New Tariff Announcement Cuts China Far Deeper

As Trump ratchets up trade tensions with the announcement of new tariffs, China has already retaliated announcing their own tariffs on $3 billion of imports from the U.S. And with that, the trade war has finally arrived.

President Trump announced Thursday that the U.S. would soon impose new tariffs on billions of dollars of Chinese imports in response to a Trump administration investigation into China’s theft of U.S. intellectual property.

The new $60 billion in tariffs will effect imports of more than 100 different Chinese goods and will also limit certain Chinese investments in the U.S. The bulk of the new tariffs will likely be focused on the high-tech industry, though the final list of the goods subject to the tariffs will be released in the next “several days” according to the fact sheet released by the USTR.



The announcement of the new tariffs sent U.S. equities tumbling with the DJIA falling 724 points Thursday, or almost 3%, its biggest fall in six weeks. All major indexes in Asia also fell Friday.

“China will not sit idly to see its legitimate rights damaged and must take all necessary measures to resolutely defend its legitimate rights,” China’s Commerce Ministry said in a statement.

In a statement Friday, the Commerce Ministry announced plans for reciprocal tariffs on $3 billion of imports from the U.S. including on pork, recycled aluminum, steel pipes, fruit and wine.

China will also pursue legal action against the U.S. at the World Trade Organization in response to the U.S.’s planned tariffs.

“The U.S. declared a trade war, but China is acting quite restrained. The list that China has announced appears to be a retaliation, but still it is very measured,” said the senior fellow of the China Association of International Trade, Li Yong. “The move sends a message that China is able to fight back, but we still want a trade peace instead of a trade war.”



“This has been long in the making,” Trump said. “We have a tremendous intellectual property theft situation going on” with China impacting hundreds of billions of dollars in trade each year, he said.

“This is an opening gambit by China, signaling that the imposition of tariffs by the U.S. will elicit what Beijing views as a proportionate retaliatory response,” said Eswar Prasad, a former chief of the International Monetary Fund’s China division. “China has the ability to inflict significant economic harm on U.S. exporters of certain goods and can also use other overt as well as covert actions such as supply chain disruptions to hurt U.S. manufacturers.”

Policy makers worldwide have warned that the brewing trade war could undermine the broadest global recovery in years. Likewise, business groups representing companies ranging from Walmart Inc. to Amazon have warned the U.S.’s tariffs could raise prices for consumers and sideswipe stock prices.



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