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Trump threatens further $100bn in tariffs against China

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US President Donald Trump has instructed officials to consider a further $100bn (£71.3bn) of tariffs against China, in an escalation of a tense trade stand-off.

These would be in addition to the $50bn worth of US tariffs already proposed on hundreds of Chinese imports.

The proposal comes after China retaliated to that by threatening tariffs on 106 key US products.

The tit-for-tat moves have unsettled global markets in recent weeks.

Analysts have said a full blown trade war between the US and China would not be good for the global economy or markets – and that ongoing behind-the-scenes negotiations between the two giants were crucial.

But market reaction in Asia trade on Friday suggested investors were not too troubled by the latest twist, and that trade war fears were somewhat exaggerated.

In China, Hong Kong’s Hang Seng was in positive territory, up 1.3%. Japan’s benchmark Nikkei 225 was also trading higher in the afternoon session.

How has this unfolded?

Earlier this year, the US announced it would impose import taxes of 25% on steel and 10% on aluminium. The tariffs would be wide ranging and would include China.

China responded this month with retaliatory tariffs worth $3bn of its own against the US on a range of goods, including pork and wine. Beijing said the move was intended to safeguard its interests and balance losses caused by the new tariffs.

Hogs are raised on the farm of Gordon and Jeanine Lockie April 28, 2009 in Elma, IowaImage copyrightGETTY IMAGES
Image captionUS pork products are among those affected by new tariffs imposed by China

Meanwhile, there had been rumblings the US was preparing to slap between $50bn and $60bn worth of tariffs on Chinese-made goods in response to unfair Chinese intellectual property practices, such as those that pressure US companies to share technology with Chinese firms.

The draft details of those import taxes were released last week when Washington set out about 1,300 Chinese products it intended to hit with tariffs set at 25% worth some $50bn.

China responded swiftly by proposing retaliatory tariffs, also worth some $50bn, on 106 key US products, including soybeans, aircraft parts and orange juice. This set of tariffs was narrowly aimed at politically important sectors in the US, such as agriculture.

In Mr Trump’s Thursday statement he branded that retaliation by Beijing as “unfair”.

“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers,” he said.

“In light of China’s unfair retaliation, I have instructed the USTR (United States Trade Representative) to consider whether $100bn of additional tariffs would be appropriate… and, if so, to identify the products upon which to impose such tariffs.”

He said he had also instructed agricultural officials to implement a plan to protect US farmers and agricultural interests.

What might the impact be?

Workers walk past imported soybeans at a port in Nantong in China"s eastern Jiangsu province on April 4, 2018Image copyrightAFP
Image captionSoybeans are one of the key US exports China said it could target with tariffs

The threats sound strident but the actual impact is far from clear or straightforward – and will vary dramatically from product to product.

To get a sense of how things might play out, let’s take soybeans as an example.

China, which is a big producer of soybeans itself, also buys about 60% of all soybeans exported by the US.

It uses the product to feed farmed animals, including pigs and chickens, as well as fish. Those animals are in turn used to help feed China’s enormous population.

China’s demand for soybeans and soybean products has buoyed the price of US soybeans for some time.

But Beijing’s tariffs against US soybeans will mostly likely see sales to China fall off, which will in turn hurt American farmers.

Many of US farmers could then be forced to switch to other crops – very few of which are as lucrative.

Soybean producing areas in the US are filled with famers who voted for Mr Trump, and so some of them are now less than happy with their president.

Meanwhile, China will need to set about sourcing the extra soybeans it needs from other countries.

India is one of the world’s biggest soybean producers, and analysts there have already pointed to a potential trade war between the US and China as an opportunity for its economy.

Other big soybean producers are Argentina and Brazil, and some studies suggest that is where China will turn to should the current set of proposed tariffs come into force.

But it could end up paying more than it currently does, ultimately forcing up the price of those animals which eat soybean products. So that would mean pork, for example, China’s most popular meat, could get more expensive. And food price inflation is something that will worry Beijing.

Beijing Deals

What China sells to the US

$462.6bn

The value of of goods bought by the US from China in 2016.

  • 18.2% of all China’s exports go to the United States
  • $129bn worth of China-made electrical machinery bought by US
  • 59.2% growth in Chinese services imported by US between 2006 & 2016
  • $347bn US goods trade deficit with China
Getty Images

How long could this last?

China has initiated a complaint with the World Trade Organisation over the US tariffs, in what analysts say is a sign that this will be a protracted process.

The WTO circulated the request for consultation to members on Thursday, launching a discussion period before the complaint heads to formal dispute settlement process.

Meanwhile, under US law, the proposed set of tariffs against about 1,300 Chinese products must now go under review, including a public notice and comment process, and a hearing.

The hearing is scheduled at the moment for 15 May, with post-hearing filings due a week later.

So, it could be some months before the USTR will announce its final findings or any decision on whether or not it will move ahead with the proposed tariffs.

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