5 WAYS TRUMP’S TARIFFS ON $200B IN CHINA GOODS COULD BE FELT
AP Baltimore – By imposing taxes on an additional $200 billion (Dh734 billion) in Chinese goods, President Donald Trump has intensified a battle of wills between the world’s two largest economies — and the outcome is far from certain. Here is a look at five potential consequences:
CONSUMERS
Unlike the first two rounds of tariffs totalling $50 billion, the new taxes launched by Trump would more directly hit American consumers. “As president, it is my duty to protect the interests of working men and women, farmers, ranchers, businesses, and our country itself,” Trump said. Starting next Monday, the US is to begin charging a 10 per cent tax on thousands of Chinese imports — tyres, windshield wipers, baseball gloves, bicycles, snakeskin pants, backpacks, trombone cases, refrigerators and wooden furniture, among others. The list runs 194 pages. Unless the administration reaches a truce with Beijing, Trump’s import tax will jump to 25 per cent in 2019. After Trump announced tariffs on washing machines toward the start of 2018, the price for laundry equipment shot up 16 per cent between February and May, according to an analysis by Mark Perry, an economics professor at the Flint campus of the University of Michigan.
COMPANIES
Many companies have warned that Trump’s tariffs threaten to disrupt their businesses and depress their revenue. The monthly manufacturing index by the Institute of Supply Management noted that some companies have expressed concern about tariffs despite an otherwise robust US economy. One food and beverage firm in the ISM survey said, “Suppliers appear to be bracing us for cost increases, given increased talk of tariffs and inflation.” Trump’s tariffs, with their uncertain duration, make it difficult for companies to plan for the future. Ted Murphy, a trade lawyer and a partner at Baker McKenzie, said the president is signalling that many companies will need to rethink their operations.
FINANCIAL MARKETS
So far, the stock market has taken the threats of tariffs in stride. Share prices have dipped, only to then resume their growth, in part because of deep corporate tax cuts that took effect this year and a solid US economy in its 10th straight year of expansion. But the new round of tariffs risks triggering a more alarming response by investors. The additional taxes suggest that the two countries are struggling to make progress in settling their differences. “It’s definitely a setback for the market that they can’t seem to get to the table,” said J.J. Kinahan, chief market strategist for TD Ameritrade.
GLOBAL ECONOMY
A prolonged trade war between the US, the world’s largest economy, and China, the second-largest, would ripple through the rest of the globe. Tariffs could translate into less trade, which could hinder growth in smaller nations. The US dollar has already begun to rise in value as trade tensions have mounted. This has insulated the United States from higher prices. But the higher-valued dollar has also diminished the value of currencies of emerging markets – which has weighed heavily on their economies. In the meantime, the value of the Chinese yuan has dropped relative to the dollar, making it easier for Beijing to withstand US tariffs.
POLITICS
The Republicans’ control of the House and the Senate is at stake in the midterm congressional races in November. Trump has portrayed the import taxes as a winning electoral issue because they’re forcing other countries to compromise with the US. But public opinion suggests that his tariffs could prove a vulnerability. A poll released August 24 by The Associated Press-NORC Centre for Public Affairs Research found that 61 per cent of Americans disapproved of the president’s handling of trade negotiations. If Democrats win, it would possibly repudiate Trump’s approach. But if many Republicans retain their seats, it could vindicate Trump’s choice to announce tariffs so close to the elections.
