Tuesday December 11, 2018

EXPLANATION OF U.S.-CHINA TARIFFS

July 12, 2018

President Trump and President Xi Jinping at the G20 Summit in 2017 WIKIMEDIA COMMONS

President Trump and President Xi Jinping at the G20 Summit in 2017. WIKIMEDIA COMMONS

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Since the beginning of 2018, trade tensions between the U.S. and China have escalated, devolving into what some are calling a trade war. So far, tariffs have been the main actions in this “war.” Tariffs are taxes  placed on imported goods. They are often used to protect a country’s domestic industry, but can also be used to reduce the amount of imports one country receives from another. Due to the additional tax on the product, these goods are more expensive to buy or sell.

President Trump initiated tariffs in the hopes that the taxes would reduce the trade deficit between the U.S. and China. This deficit was a defining issue of his election campaign and remains a focus for his administration. After their first meeting in Mar-a-Lago in April 2017, President Trump and Chinese President Xi Jinping set up an economic dialogue, but this did not achieve the amount of change the administration wanted.

The first few tariffs the Trump administration imposed were not exclusive to Chinese imports, but did target some key areas of Chinese exports. In August 2017, President Trump instructed the U.S. Trade Representative (USTR) to begin a Section 301 Investigation (USTR Report – PDF) into China’s alleged theft of American intellectual property. Releasing the results in March 2018, this investigation found that “the acts, policies, and practices of the Chinese government related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.” In response, President Trump directed his administration to file a complaint with the World Trade Organization (WTO), to prepare a list of Chinese imports to tariff, and to find ways to restrict Chinese investment in American companies. The first U.S. tariff directly targeting Chinese imports was imposed on July 6, 2018. China enacted counter tariffs immediately. The Trump administration is in the process of enacting additional tariffs.

In 2016, the U.S. imported $478.8 billion of Chinese goods and services, while exporting only $169.8 billion to China. China has fewer U.S. products to tariff, which means they have fewer avenues of retaliation. In response to the list of potential tariffs released by the USTR on July 10, China has resolved to find ways to hit back. This may include filing a complaint with the World Trade Organization, consumer boycotts of American goods, using bureaucracy to make it more difficult for American companies to operate in China, limiting Chinese tourism to the U.S., or selling some of its U.S. Treasury holdings.

Tariffs affect more than just the specific companies and industries targeted, especially tariffs on basic manufacturing components. Increased costs of production will eventually be felt by American consumers and industries using these products.

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The following is a summary of the tariffs announced and enacted so far:

  1. U.S. tariffs on solar panels and washing machines (not exclusive to China)
  2. U.S. tariffs on steel and aluminum (not exclusive to China)
  3. Chinese tariffs on American pork, fruits, nuts, wine, and steel pipes
    • Announced – April 1, 2018
    • In effect – April 2, 2018
    • Affects $3 billion of U.S. exports
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  4. U.S. tariffs on Chinese manufactured products and components
  5. Chinese tariffs on American cars, beef, soybeans, and additional agricultural products
  6. U.S. tariffs on fish, petroleum, chemicals, handbags, textiles and other products
    • Trump announced – June 18, 2018
    • USTR released list – July 10, 2018
    • USTR released statement raising potential tariffs to 25% – August 1, 2018
    • In effect – September 24, 2018
    • Affects $200 billion of Chinese exports with 10% tariffs. On January 1, 2019 these tariffs will rise to 25%.
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  7. Chinese tariffs on $60 billion of various American imports

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Total amount of trade affected by tariffs so far:

American tariffs on Chinese imports – $250 Billion (Figure does not include tariffs on solar panels, washing machines, steel, or aluminum)
Chinese tariffs on American imports – $110 Billion

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Summary updated: September 18, 2018

Compiled and edited by Emily Bulkeley

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