US President appears with China's President in China in 2017Image copyright
Getty Images

Donald Trump campaigned for election on a promise to make trade fairer for the US, and his push to do so has him fighting with some of America’s oldest trading partners.

He has already imposed – or threatened to impose – taxes on imports from China, Mexico, Canada and the EU, to encourage consumers to buy American products.

Those countries have all promised to retaliate, sparking fears of an all-out trade war.

Mr Trump’s hard line on trade, which saw him withdraw from the Trans-Pacific Partnership trade pact (TPP) last year, marks a striking change from the free trade policies that have governed the exchange of goods for decades.

Here’s what’s gone on so far.

Trump takes on China

In January, the US slapped controversial tariffs on imported washing machines and solar panels, which was seen as Trump’s most significant trade move since his decision to pull the US out of the TPP and renegotiate the North American Free Trade Agreement (Nafta).

After a lot of to-ing and fro-ing, Mr Trump then said in June he would impose tariffs – or import taxes – on $50bn-worth (£38bn) of Chinese goods. The first tariffs are due to come into effect on 6 July.

Mr Trump said this would stop the “unfair transfers of American technology and intellectual property to China” and protect jobs.

Tariffs, in theory, will make US-made products cheaper than imported ones, so encourage consumers to buy American. That will then boost local businesses and support the national economy.

Businesses will have pay a 25% additional tax on certain Chinese products they import – including aircraft tyres and commercial dishwashers.

Media playback is unsupported on your device

Media captionHow hogs and Harleys became weapons in a looming trade war.

China did not take the news laying down. It retaliated in kind, saying it too would collect a 25% levy on $50bn worth of US goods, also starting on 6 July. Taxes will be charged on imports of agricultural products, cars and marine products from the US, to name a few.

Upping the stakes, Mr Trump then threatened to slap a 10% levy on an additional $200bn of Chinese goods if China “refuses to change its practices”. He ordered his staff to identify a list of Chinese goods to be taxed.

China said it would respond with measures of a “corresponding number and quality” if the US issued the list.

Is its beef only with China?


The US has already started charging levies on the imports of steel and aluminium from the European Union, Mexico and Canada.

Image copyright
Getty Images

US businesses have to pay a 25% tax when they import steel from those places and a 10% levy to buy aluminium from them.

The EU, Mexico and Canada were all outraged and vowed to fight back.

The EU said it would enact retaliatory tariffs on some €2.8bn (£2.5bn) worth of US goods including jeans, motorbikes and bourbon whiskey. These are due to come into effect on 22 June.

Canada is planning countermeasures on C$16.6bn ($12.5bn; £9.5bn) worth of US goods from 1 July. It will slap a 25% tax on some US steel products and it plans a 10% levy on varied items including yoghurt, whiskeys and coffee.

Mexico has also released a list of products on which it will impose tariffs, including pork and cheese. Businesses will also have to pay a 25% duty to import some American steel products.

Who has been worst affected so far?

Given that the US buys nearly four times as much from China as it sells to them, China is limited on how far it can retaliate through trade.

There is some media speculation it could opt for alternatives measures, including taking action against US companies in China and devaluing its currency to fight back. A lower-value yuan would make it cheaper for foreigners to buy Chinese exports abroad, somewhat offsetting the upward pressure on prices caused by the US levies.

While the impact of the growing trade spat on the US and China economies is expected to be small, analysts are concerned about its escalation.

This is already hurting stock markets.

“The direct impact of the Trump administration’s 25% tariff on Chinese goods will actually be somewhat limited, but the risk of subsequent tit-for-tat retaliation on both sides is no small matter,” Japanese financial services group Nomura said in a research note.

Companies are also getting worried. Carmaker Daimler has said it expects earnings from car sales to be “slightly below the previous year”, because the tax will make their cars more expensive for consumers in China, a key market.

There are also concerns that smaller countries further down the supply chain could be caught out.

According to the Economist, 30% of the value of the goods China exports to America originates from third-party countries

Japan, it says, is the country that exports most to firms in China that export onwards to America.

Source link