US-China trade war has intensified with China’s announcement of additional tariffs on $75 billion worth of American products, and resume levies on American autos and auto parts.
China's Finance Ministry will place 5% or 10% of additional tariffs on US imports starting from 1st September. Ministry also announced plans to resume tariffs on US imports of automobiles and automobile parts.
There will be 25% tariff on vehicles and 5% on parts, which would take effect on December 15th. The new tariffs will target 5,078 products, including soybeans, coffee, whiskey, seafood and crude oil.
According to CNN, last week, China said it would take countermeasures after the United States announced it would impose 10% tariffs on Chinese imports worth $300 billion.
The United States postponed the implementation of about half of those tariffs, which will cover several categories of Chinese-made consumer goods, until December. They had been due to take effect in September.
US President Trump responded swiftly, saying Friday afternoon that he was increasing rates on existing tariffs on Chinese goods.
The $250 billion of goods and products from China currently being taxed at 25% will be taxed at 30%, Trump said on Twitter. The remaining $300 billion of goods and products that was to be taxed at 10% will now be taxed at 15%, Trump wrote.
Fed Chair Jay Powell, blaming trade war, said, “Trade policy uncertainty seems to be playing a role in the global slowdown.....We will act as appropriate to sustain the expansion".
Monetary policy can only do so much amid the uncertainty surrounding the White House's trade policy, Powell said, in his highly anticipated speech.
Trump fired back on Twitter after central bank chairman said China tensions are stoking anxieties.
The president asked whether Federal Reserve Chair Jay Powell or China's Xi Jinping "is our bigger enemy".
As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great... said Trump.
Stocks plunged as Trump ‘ordered’ U.S. companies to seek alternatives to China.
According to CNN, The National Retail Federation issued a statement calling Trump’s demand "unrealistic."
"For years, retailers have been diversifying their supply chains, but finding alternative sources is a costly and lengthy process that can take years. It is unrealistic for American retailers to move out of the world's second largest economy," the group said. "Our presence in China allows us to reach Chinese customers and develop overseas markets. This, in turn, allows us to grow and expand opportunities for American workers, businesses and consumers."
The American Farm Bureau Federation said the tariff announcement "signals more trouble for American agriculture."
"We know continued retaliation only adds to the difficulties farm and ranch families are facing and takes the situation in the exact wrong direction," the statement said.
The move comes amid indications the ongoing trade war is having an impact on the world's two largest economies. Industrial production in China — an important indicator for the country's economy — grew just 4.8% in July compared to a year earlier, wrote CNN.
American factories are also contracting for the first time in a decade, and 10-year Treasury yield dipping below the two-year Treasury rate, are historic predictors of a coming recession.
Consumer spending, could be hurt by higher prices from the pending tariffs on goods like phones, video games and athletic shoes, analysts have warned.
The US Chamber of Commerce called on China and the United States to "get back to the table".
The fact of the matter is that nobody wins a trade war, and the continued tit-for-tat escalation between the U.S. and China is putting significant strain on the U.S. economy, raising costs, undermining investment, and roiling markets," the statement said.
