In a move many economic policy experts had already predicted as probable, China has decided to raise tariffs on a diverse spectrum of American goods. This move is widely seen as retaliation for USA’s latest action in the trade dispute. Last Friday, President Trump announced that his administration would increase tariffs on imported Chinese goods. That move only increased tensions in what can now rightly be described as a trade war between the US and China.
Last week, talks between the sides to resolve the conflict broke down before reaching a deal. And the markets have responded to this economic uncertainty, as American stocks plummeted on Monday.
Many experts believe that China views the actions of the US as high-handed and disrespectful. Zhu Ning, an economics professor at Tsinghua University, stated that he believes mutual respect is crucial for negotiations.
And this will be important more than ever, now that the trade conflict shows no signs of winding down. It remains unclear whether China’s reciprocative measures will end here. During past periods of tension, China was known to intentionally hinder imports at customs and pursue investigations into foreign companies.
Hu Xijin, who edits a Chinese Communist Party tabloid, believes that more Chinese measures to reciprocate will ensue. Purchases of Boeing aircraft might be halted, as well as major purchases of US agricultural products.
As things stand now, an increase in tariffs on a broad range of American goods will come into effect on June 1. Goods that previously had customs tariffs of 5% and 10% will now stand at 20% or 25%, depending on the specific product.
This small delay until the beginning of June leaves some hope that negotiators will reach a deal in the meantime. After all, this delay closely matches the deadline that President Trump’s administration put on their own tariff increase.
Indeed, President Trump’s increased tariffs won’t be activated right away either. The tariff raise he announced on Friday won’t go into effect for a few weeks. That leaves a chance for the two sides to resolve their trade dispute in the meantime. To achieve this, the Trump Administration will depart from the standard custom of evaluating tariffs on imported goods as soon as they reach US airports and seaports.
Instead, the raised tariffs on $200 billion worth of Chinese goods will only apply to shipments that were sent from Chinese shores from Friday onward. That is how the American delay in tariffs was designed, seeing as shipments from China take two to four weeks to get to the US via seaports. To put this into context; experts agree that around 90% of American imports from China arrive by sea.
Of course, what matters now is how long this mutual tariff retaliation could last. As it stands now, there is no way of telling whether the trade conflict between the US and China will last for months or years. Since President Trump came into office, both sides were seemingly on the verge of closing a deal multiple times; only for the negotiations to fall apart.
In fact, the round of negotiations held in Washington last week was the 11th occasion in which senior officials from both countries met to discuss the trade dispute since President Trump took office. Global market strategists claim that markets have shown concern over how close the two countries would come to a deal before one of them would quit, in multiple instances. However, a prolonged trade conflict ultimately benefits neither of the two sides. That is one of the chief motivators for reaching a resolution before the new tariff raises take effect in both countries.