The GCC braces for full impact of China-US trade war

Eileen GuzmanAug 04, 2018

Derek Scissors, a China scholar at the American Enterprise Institute in Washington, said a 25 percent tariff rate is more likely to shut out Chinese products and shift American supply chains to other countries, as a 10 percent duty could be offset by government subsidies and weakness in China's yuan currency.

Trump set his sights on China during the 2016 presidential campaign and has followed through during his presidency with a protectionist strategy that he says is aimed at strengthening USA companies and boosting jobs at home. The International Monetary Fund has cited escalating trade disputes as a growing downside risk that's threatening the strongest global economic upswing in seven years.

"We will give people a chance obviously to comment on the substantial effects of a 25 percent duty as oppose to a 10 percent duty", a senior administration official told reporters. Moving forward with tariffs on $200 billion of Chinese imports would mean higher prices for a long list of consumer goods, acting as a drag on household income.

The possible change in tariff rate will alter a public comment period for the proposed tariffs on $200 billion worth of goods ranging from Chinese tilapia fish to furniture and lighting products, extending a comment deadline to September 5 from a previously announced deadline of August 30, the officials said.

The two countries have not had formal talks on the trade dispute since early June.

The trading relationship between the United States and China has moved from near zero to a deficit of $US375 billion over the past 20 years.

China has announced plans to put tariffs of up to 25% on USA products worth $60 billion, the latest salvo in an escalating trade war. Beijing responded by imposing the same penalties on the same amount of US imports. After the earlier tariffs $34 billion of US goods, about $120 billion is available for retaliation.

President Donald Trump's administration said on July 10 it would seek to impose the 10-per cent tariffs on thousands of Chinese imports.

A spokeswoman for the US Trade Representative's Office declined to comment on the proposed tariff rate increase or on whether changing them would alter the deadlines laid out for comment period before implementation.

The asymmetric economic and financial performance of the United States and China has convinced the White House it has "escalation dominance" and should press home its advantage.

Trump campaigned on a promise to bring down America's massive trade deficits by renegotiating trade agreements and getting tough on countries like China that sell the USA far more than they buy from it.

If the United States takes further steps to hinder trade, Beijing will retaliate, Foreign Ministry spokesman Geng Shuang has told a daily news briefing. "The cost increases will be passed on to customers, so it will affect most Americans' pocketbooks".

Saying it was "forced to act", Beijing cast the move as a response to Trump's threat on Wednesday to raise a proposed tariff rate on $200 billion worth of Chinese goods from 10 percent to 25 percent. Administration officials are exploring an additional $200 billion of goods on which tariffs might be imposed.

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