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China Says U.S. Has Begun 'Largest Trade War' In History, Retaliates With Tariffs

Jul 6, 2018
Originally published on July 6, 2018 1:12 pm

Updated at 8:15 a.m. ET

As the day dawned across the U.S. on Friday, a new economic reality dawned with it: The tariffs long threatened against billions of dollars in Chinese goods took effect just at midnight ET while many Americans were sleeping — but Beijing was ready immediately with a wake-up call of its own.

The new trade regulations imposed by the Trump administration, which levy a 25 percent tariff on $34 billion worth of Chinese imports to the U.S., have "violated [World Trade Organization] rules and launched the largest trade war in economic history to date," China's Ministry of Commerce declared in a statement Friday.

Chinese authorities quickly retaliated with equivalent tariffs on $34 billion worth of imported U.S. goods — previously promised as ranging from vehicles to soybeans, beef and other agricultural products.

The rapid tit for tat follows weeks of anxious anticipation over the "trade remedies" President Trump vowed last month to implement. At the time he announced the tariffs, back in mid-June, Trump said the current U.S.-China economic relationship had grown to be "no longer sustainable."

"Trade between our nations," he explained, "has been very unfair, for a very long time."

And he has promised that Friday's package of economic penalties will not be the last. On Thursday aboard Air Force One, the president vowed to implement tariffs on an additional $16 billion worth of imported Chinese goods within the month.

China, for its part, has promised at each step of the way to retaliate in kind. "China is forced to strike back to safeguard core national interests and the interests of its people," its commerce ministry declared.

The two countries increasingly have engaged in verbal sparring in recent months, but Friday's pair of haymakers has dramatically escalated the trade dispute — and that has investors across the world worried about what comes next.

"What we can expect is disruption in supply chains. We can expect job losses and a decline in investor and consumer confidence," longtime Beijing-based attorney James Zimmerman tells NPR's Rob Schmitz. "And that's going to impact the stock market. And the impact on U.S. business, in my estimation, will be substantial."

Substantial they may be, but the average U.S. consumer will likely not see these impacts directly for a little while. Mary Lovely, economics professor at Syracuse University, says that roughly 60 percent of U.S.-China trade involves parts and supplies, rather than final goods — so the most immediate effect will be felt by the companies making the products, not the consumers finding them on store shelves.

But eventually those costs will take their toll on the average wallet, and it likely won't be simply because of these tariffs. Jeremy Haft, author of Unmade in China, tells NPR's Noel King that Beijing has a number of arrows in its economic quiver and that it is "already using these weapons."

"China can make it much more difficult to operate on the mainland," Haft says. "For example, they can quarantine [U.S.] products for a long time. They can make products difficult to clear customs."

He explains that he has already seen the effects in the pork industry.

"Normally, if your papers are in order, the pork proceeds smoothly through customs and into the country," he says. "But what's happened increasingly, is suddenly it became much, much more difficult for pork to clear customs and that becomes very expensive — especially with a perishable product, which can spoil in the port if its not kept in the right refrigeration condition."

The White House, however, has cast its volley of tariffs as a long overdue move to rectify a longstanding imbalance in trade between the countries — particularly, as Trump has said, in China's "unfair practices related to the acquisition of American intellectual property and technology."

But China is not the only country to find itself in Washington's crosshairs lately when it comes to trade.

The Trump administration engaged in a similar tit for tat last month with the European Union, Mexico and Canada.

In the weeks since the U.S. leveled tariffs on steel and aluminum — which the EU called illegal — Mexico retaliated with levies of 15 percent to 25 percent on U.S. agricultural products; Canada imposed tariffs on nearly $13 billion of U.S. goods; and the EU hit back with its own 25 percent tariff on distinctively American products ranging from bourbon to Harley-Davidson motorcycles.

Just days after the EU retaliation, Harley-Davidson said it plans to move its production of the motorcycles it sells in Europe overseas. The company said in a Securities and Exchange commission filing that the tariffs "would have an immediate and lasting detrimental impact to its business in the region."

The U.S. Chamber of Commerce, which has come out against the Trump administration's trade policy, published a state-by-state analysis of what it says the effects of that policy will be. The organization says some states — such as Alabama, Texas and Wisconsin, where Harley-Davidson is based — are likely to see upward of $1 billion in state exports threatened by a trade war with multiple fronts.

Still, the Trump administration sees the negative impacts as short-term "hiccups" on the path to more permanent solutions.

"The president is trying to fix long-term problems that should have been dealt with long time ago [and] weren't," Commerce Secretary Wilbur Ross said earlier this week, "and there obviously is going to be some pulling and tugging as we try to deal with very serious problems."

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