It looks like madness on the surface, Trump attacking the global supply chain via hard tariffs on China — but can it end up a net positive for trade? We’re all assuming this is nothing more than a tactic. What if Trump is crazy enough to keep this war going, and China doesn’t fold?
Dare I say, I’ll need to pay up for socks at Target?
But the Trump team has paid little heed to such warnings, with Commerce Secretary Wilbur Ross this week slamming them as “premature and probably quite inaccurate.”
The US will levy a 25 percent tariff on more than 800 Chinese product categories, worth around $34 billion in annual imports, and has warned of more to come if China retaliates.
– Trump’s round two to follow –
Trump has threatened to progressively ratchet up US penalties to a total of $450 billion in goods, which would represent the lion’s share of all of China’s exports to the United States.
The tariffs target a broad spectrum of Chinese goods — such as passenger vehicles, radio transmitters, aircraft parts and computer hard drives — from industries Washington says have benefited from unfair trade practices.
A second tranche of 284 goods worth $16 billion a year is currently under review and could be added to the US list.
China is expected to retaliate as soon as the US tariffs go into effect, imposing duties on goods worth roughly the same amount but with a greater emphasis on politically sensitive agricultural products.
“The US has provoked this trade war. We do not want to fight it, but in order to safeguard the interests of the country and the people, we have no choice but to fight,” said China’s commerce ministry spokesman Gao Feng.
International Monetary Fund chief Christine Lagarde already sounded the alarm about the cycle of retaliation, saying it would only create “losers on both sides.”
And Gao noted that of the $34 billion in taxable products on the US list, about $20 billion — or nearly two thirds — are made by firms with foreign investment, including a “significant portion” from America.
“The US’s measures are essentially attacking the global supply and value chain. Simply put, the US is opening fire on the whole world, and also firing at itself,” Gao said.
But Trump tweeted this week that the American economy is doing “perhaps better than ever” even “prior to fixing some of the worst and most unfair Trade Deals ever made by any country.”
And in New York, stocks shrugged off their persistent trade war jitters to post solid gains ahead of Friday’s highly anticipated employment report. The benchmark Dow Jones Industrial Average added 0.8 percent.
Under the banner of his “America First” policy, Trump has also targeted other traditional trade partners of the United States, such as Canada, the European Union, Japan and Mexico.
Prices are rising, especially for steel and aluminum, and companies are starting to feel reticent about investments or planning to shift production overseas to avoid retaliation against US exports.
There have been immediate job losses at America’s largest nail manufacturer, Mid-Continent Nail Corporation, due to rising steel prices amid warnings the company may have to shut down operations altogether.