US goes for seconds: trade war escalates, more tariffs targeting 1,300 products made in China

Following the Trump administration’s introduction of its section 232 tariff package, largely tariffs on metals like steel and aluminum, China brought its own retaliatory tariff package to the table, mirroring the actions of the US. The hope was that the US would not follow through on pushing further trade obstacles given that, rather than obtaining its desired effect, the change of Chinese trade policies to better favour American business, China would merely effect its own packages in proportional response to America’s, in effect initializing a trade spat between the two countries: the US to achieve more favourable trade conditions, and China responding to the US’s economic belligerence.

However, the US Trade Representative Robert Lighthizer has put forward a new list of section 301 tariffs, targeting over 1300 tariff lines of products manufactured in China and imported into the US to be subject to a 25% tariff. The motive behind it remains punitive in nature for China’s alleged theft of American intellectual property, which is said to be somewhere in excess of $50 billion, which is about the amount that this new package is designed to address based on the annual trade value of the current year, which is said to be “appropriate both in light of the estimated harm to the U.S. economy, and to obtain elimination of China’s harmful acts, policies, and practices.”

While China has already issued one such retaliatory tariff measure against the US, it has publicly declared that it will respond in kind if the US imposes further sanctions, which the US has now delivered as of Tuesday afternoon. Reuters reports:

BEIJING, April 4 (Reuters) – China’s commerce ministry said on Wednesday it “strongly condemns and firmly opposes” the proposed U.S. tariffs following the Section 301 probe and will take counter measures, according to the official Xinhua news agency.

The response follows a move by the Trump administration on Tuesday to slap 25 percent tariffs on some 1,300 industrial technology, transport and medical products to try to force changes in Beijing’s intellectual property practices.

The Ministry of Commerce (MofCom) said it “will soon take measure of equal intensity and scale against U.S. goods.”

“We have the confidence and ability to respond to any protectionist measures by the United States,” said MofCom.

The U.S. Trade Representative’s (USTR) office target list is broad and includes products from military shotguns to sewing machines.

The USTR list follows China’s imposition of tariffs on $3 billion worth of U.S. fruit, nuts and pork to protest new U.S. steel and aluminum tariffs imposed last month by U.S. President Donald Trump.

“The findings of the US Section 301 investigation are a willful distortion of facts and full of selective assertions and allegations,” said Zhang Xiangchen, Beijing’s ambassador to the World Trade Organization.

The investigation was made on Chinese imports under Section 301 of the 1974 U.S. Trade Act.

“What Washington truly wishes is not a trade war, but to intimidate China by wielding the baton,” said an editorial in the Global Times paper.

“The latest U.S. measures against China carry a sense of containment, which purportedly is commonplace among U.S. politicians,” it added.

The public is to be allowed 60 days to answer the decision as the government will hold hearing regarding the tariff package. American retailers are already in a stir over the matter with concerns of an emerging trade war damaging the American consumer products market. Additionally, economic damage from this decision is already manifesting itself as corporate producers are beginning to embark on intentional overstock conditions as their confidence in the market’s future adjusts accordingly.

America’s consumer based service economy will be experiencing quite a shock as prices increase in an effort to compensate for the increase in cost that these tariffs will bring, being passed on to the American consumer. In effect, American consumers could end up paying for the tariff, where Americans will have to part with a greater percentage of their expendable liquidity, potentially resulting in a smaller amount of overall consumer activity, which would affect American retailers in a substantial way.