Trump Administration Readies Tariffs On $200 Billion Of Chinese Imports

Daniel Fowler
July 12, 2018

China slammed the latest U.S. tariff threat as a "totally unacceptable" escalation of their trade battle and vowed Wednesday to protect its "core interests".

While today has produced the best day since June 27 for the US Dollar, it's not necessarily the right time to say that today also represents a material turning point for the world's reserve currency.

"This new round of proposed tariffs takes the fight onto yet another level from which it is going to be hard for either side to make a graceful retreat", said Eswar Prasad, former head of the International Monteary Fund's China division. "Right now, world trade is relatively chaotic. We believe the USA measures interfere with economic globalization and damage the world economic order".

China immediately retaliated with duties on the same value of US goods, including soybeans and cars.

China's compliance with WTO guidelines lies at the heart of the conflict, notably over Beijing's alleged state support for purportedly private companies. "It has to resolutely fight back while taking proper measures to help minimise the cost to domestic enterprises and further open up its economy to global investors", it said. "Unfortunately, China has not changed its behavior - behavior that puts the future of the US economy at risk. There is no justification for such action". While earlier tariffs were expected to have only a limited impact, economists warn a full-blow trade war could derail the strongest economic upswing in years.

"As a result of China's retaliation and failure to change its practices, the president has ordered USTR to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports", U.S. Trade Representative Robert Lighthizer said in a statement.

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Senate Finance Committee Chairman Orrin Hatch, R-Utah, responded to Lighthizer's announcement with dismay.

According to Reuters, there has still been some critical coverage of the U.S.as the two nations exchange massive tariffs, but the criticism has largely not been directed at Trump the individual.

"Tariffs on such a broad scope of products make it inconceivable that American consumers will dodge this tax increase as prices of everyday products will be forced to rise", David French, the group's senior vice president for government relations, said in a statement.

Unfortunately for markets, no end is in sight, with further retaliatory levies nearly certain to be enacted by China in the coming days or weeks. In contrast, the US S&P 500 has so far fallen by much less.

The Retail Industry Leaders Association (RILA) was quick to condemn the proposal, saying it will punish American consumers.

"Judging from (China's) economic fundamentals and corporate earnings expectations, which are under pressure amid the trade war with the United States, the stock market is yet to reach a bottom", said Yan Kaiwen, an analyst with China Fortune Securities. "This is an appropriate response under the authority of Section 301 to obtain the elimination of China's harmful industrial policies". They would go into effect sometime after August 30.

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