During recent trade talks in May, China backtracked on commitments it had made for freer trade, which prompted President Trump to increase tariffs on $200 billion worth of Chinese products from 10% to 25%. He also has plans to impose a 25% tariff on another $325 billion worth of Chinese products over the summer (WSJ).
What is China doing?
To counter the new U.S. tariffs, on May 10 China announced that on June 1 current tariffs between 5% and 10% would increase to between 10% and 25%, affecting $60 billion worth of mostly U.S. agricultural goods such as soybeans, beef, and pork. China could also tax U.S. tech companies like Apple, which would then be forced to raise prices (WSJ, NPR).
What are the effects?
On May 13, the first day markets were open after the new tariff announcements, global stocks had their biggest one-day drop since January, the U.S. stock market tumbled, and even China’s currency fell to its lowest level yet this year (Reuters).
Big brand names including Costco and Walmart have raised prices, and the tariffs have hit American farmers “at every single angle.” China’s consumer market is a key source of revenue for American farmers, particularly for soybeans and pork. Midwest farmers’ crops and stockpiles were already ruined by major flooding in March; the addition of tariffs has resulted in “one of the lowest net farm incomes we’ve seen in over a decade.” Iowa truck manufacturer Kevin Watje and Illinois farmer Eldon Gould discuss the tariffs’ impacts on their industries in this New York Times podcast.
Experts from the Federal Reserve Bank of New York, Princeton, and Columbia University report that tariffs from 2018 increased costs for consumers by $1.4 billion per month. Many of the goods affected are “part of the daily lives of American consumers,” including soap, lithium batteries, washers and dryers, clothing and shoes, and electronics. The Office of the U.S. Trade Representative released a list of Chinese goods that would be hit with new tariffs in the coming months.
Where is this going?
Despite this latest tariff exchange, the U.S. and China have agreed to keep negotiating to end China’s protectionist policies and promote freer, fairer trade practices. President Trump said that he and Chinese President Xi Jinping will meet in Japan at the June 28-29 G20 meeting. (Reuters).
Go Deeper:
Find out and share how tariffs impacts a local business in your community. Plan a Circle Meeting to discuss Tariffs and be sure to include the Policy Circle Brief on U.S. Foreign Policy Asia Pacific as part of your conversation.
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