International

Trade war: US imposes fresh tariffs on China

New US tariffs on $ 16bn (£ 12.4bn) of Chinese goods have come into effect, in an escalation of their trade war.

A total of $ 50bn worth of imports will now be taxed by this second round, raising expectations that China will retaliate.

Since the opening salvo in July, tensions between the world’s two largest economies have worsened, hurting their companies and economies.

Officials from both countries are holding talks in Washington.

But hopes are not high they will bring a breakthrough.

The new US tariffs came into effect at 12:00 Beijing time (05:00 BST). The 25% tax will affect nearly 280 Chinese goods, including chemical products, agricultural equipment, motorcycles and antennas.

The move completes the series of tariffs on $ 50bn of Chinese goods the US initially set out to tax.

China has warned it will once again retaliate with its own 25% tariff on $ 16bn of US goods including coal, medical instruments, cars and buses.

Washington’s second round of tariffs comes despite testimony to the US Trade Representative’s Office by dozens of American companies and industry groups.

Many said the new tax would hurt their businesses and warned that they would not be able to absorb another tax without raising prices for US consumers.

However, the $ 16bn is a drop in the ocean compared to the amount Donald Trump has flagged could be hit. The president said in July he was ready to tax all of the $ 500bn worth of Chinese imports into the US.

 

Impact felt further afield

What hurts Beijing can also hurt countries further afield.

Many goods that are needed for final assembly in China actually come from other South East Asian countries such as Malaysia and Indonesia, and go through Singapore to have some other products added on.

Economists say that means some countries in the Asia Pacific region could see as much as a percentage point shaved off economic growth.

International trade is what has helped Asia turn itself from an economic backwater into one of the most dynamic and fast growing areas in the world. It’s lifted millions out of poverty.

But if this trade war continues – the outlook could be far more grim.

The US has threatened a third round of tariffs on an additional $ 200bn of Chinese goods and they could come as soon as next month.

It has since said those products could be hit with a 25% levy – more than double the 10% originally planned.

China has said it would respond with another tariff on $ 60bn of US goods.

But it would be harder for Beijing to match the US threat because its manufacturers export far more products than American businesses send to China.

The US Trade Representative’s Office is holding hearings this week on the likely impact of more tariffs.

China has previously accused the US of “unilaterally” heightening tensions between the two economic giants.

There are signs the trade war is already having an impact.

Major carmakers recently warned that changes to trade policies were hurting performance.

The International Monetary Fund said last month an escalation of the tit-for-tat tariffs could shave 0.5% off global growth by 2020. (BBC)