US Lost Its Trade War With China

Robyn Valdez
April 5, 2018

More concerning is what's next.

Markets have been buffeted in recent weeks by everything from a volatility spike and a tech selloff to fears of an all-out trade war.

Neither side has said when it will, if ever, actually impose the tariffs.

Steel and aluminum suppliers began raising prices within 24 hours of Trump announcement last month of his intention to hit the metals with steep import tariffs, according to the Institute for Supply Management.

"I think of a trade war as an escalation ladder, and these moves are still low rungs on the ladder", he said. "We're not in a trade war, but we're definitely headed down a slippery slope".

That followed the release of a U.S. government list of Chinese goods targeted for punitive tariffs in response to complaints Beijing pressures foreign companies to hand over technology. The government is holding a public hearing on May 15 for U.S. businesses to air concerns to administration officials.

China then responded within 11 hours with penalties on US$50 billion of USA goods ranging from soybeans, cars and chemicals to whisky, cigars and tobacco with its Vice Finance Minister stressing the country had never given in to external pressure.

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China's efforts to hit back at USA pork products - with the US$3 billion worth of tariffs announced earlier this week - could be good news for alternative suppliers, like Germany, Spain and Denmark, von Mehren said. The tariff would apply to more than 100 products, including soy. It could likewise find other suppliers for soy, even if China now relies most heavily on American producers.

Adams, of PNC Financial, said the tariffs would be especially painful for companies in agriculture: machinery makers in the USA would pay more for imported components, and they wouldn't sell as much food in China because their products would be more expensive.

At this moment, China appears to be attacking states - and workers - that voted for Trump in the 2016 election.

Still, the tariffs will have an effect on Sonoma County as they will be imposed upon US wine.

The Chinese are probably in a stronger political position.

The step escalates a brewing trade war between the world's two largest trading nations, with the Trump administration's latest offensive based on alleged infringements of intellectual property in China.

Other than steel and aluminum, the tariffs are only threat at this point: the USA will have a 30-day comment period before determining the final list of Chinese goods on the hit list, and China also is holding off pending talks.

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Here's what you need to know about the ongoing trade dispute.

"It's the tit-for-tat uncertainty that shakes business confidence", S&P Global Ratings senior economist Satyam Panday said. "This is a classic lose-lose proposition, no one wins".

"The U.S. list suggests that the government is targeting the "Made in China 2025" initiative, while China's retaliation intends to bring Americans back to the negotiation table", said Zhou Hao, an economist at Commerzbank AG in Singapore, said in an email. Other U.S. carmakers such as General Motors Co. and Ford Motor Co. also manufacture in China.

Raising the tariffs on steel and aluminum will increase the cost of products made with them. The United States and South Korea recently reached a deal in principle.

Boeing said it was assessing the situation while analysts from JP Morgan said the proposals from China looked to have been calibrated carefully to avoid a major impact on the planemaker.

In conclusion, whilst the current discussions over tariffs are rattling investors' nerves, a global trade war, which would hurt all parties and reduce global economic growth therefore affecting corporate earnings, seems unlikely. Still, experts worry that the United States hasn't been clear with China about what exactly it wants.

"It (US protectionist measures) is the policy equivalent of peeing in your trousers to keep warm".

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