President Donald Trump directed the U.S. Trade Representative to prepare new tariffs on an additional $200 billion in Chinese imports as the two nations edged toward a trade war. In response, China threatened “comprehensive measures,” raising the risk that it would target major American companies operating in China. Trump’s proposed new tariffs would mark the latest round of punitive steps between the world’s two largest economies. Analysts say a trade war would undermine both nations’ economies and likely slow global growth. Stock markets fell sharply on fear of the likely consequences for companies and the global economy.
The first round of tariffs imposed by each side are to take effect July 6. The United States would impose tariffs of 25 per cent on $34 billion of such Chinese imports as construction machinery, aerospace and power generation equipment. The White House is also finalizing a list of $16 billion in additional goods that it would sanction later. China said it would retaliate in kind, with tariffs on U.S. goods like electric cars, whiskey and soybeans — a politically and economically vital export of America’s heartland, where Trump enjoys support. The tariffs on an additional $200 billion in Chinese goods that Trump told his trade representative to seek would take effect if China proceeded with its plans for retaliatory tariffs. And Trump threatened tariffs on $200 billion more in Chinese products if Beijing lashed back again.
Trump’s new proposed tariffs on Chinese imports are the latest in a spate of protectionist measures he has unveiled in recent months. They included tariffs on steel and aluminum imports and a combative stance on trade talks from North America to Asia. The escalation in the dispute with China may also serve as a warning to other trading partners with which Trump has been feuding, including Canada and the European Union. But he has upped the ante and is now threatening to impose taxes on a total of up to $450 billion— a value equal to nearly 90 per cent of Chinese goods imported to the United States last year. U.S. companies with sales and operations in China are especially vulnerable to Chinese retaliation. Qualcomm, for example, derives 63 per cent of its revenue from China, Apple 18 per cent and Starbucks 11 per cent.