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WASHINGTON – The trade war that erupted on Friday between the United States and China involves a major escalation risk that could weaken investments, depress spending, disrupt financial markets and slow down the economy. World.
when the Trump administration imposed a 25% tariff on 34 billion dollars of imports from China, and Beijing quickly retaliated by imposing duties on an equal number of products US. He accused the United States of igniting "the biggest trade war of economic history".
As a result of this first round of hostilities, US companies and, ultimately, consumers could pay more for products made in China. machinery. And US suppliers of soy, pork and whiskey could lose their competitive edge in China.
These initial tariffs are not expected to cause serious damage to the two largest economies in the world. Gregory Daco, head of the US economy at Oxford Economics, calculated that growth in both countries would not be higher than 0.2% until 2020.
But the conflict could soon escalate. President Donald Trump, who prides himself on winning a trade war, says he is ready to impose tariffs on $ 550 billion of Chinese imports, a figure that exceeds $ 506 billion shipped by the United States. China in the United States last year.
The escalation of tariffs is expected to slow down business investment, companies waiting to see if the administration can conclude a truce with Beijing. Some employers will likely put hiring on hold until the picture becomes clearer. The damage could risk canceling some of the economic benefits of the tax cuts last year.
"Trade disruption is the biggest threat to global growth," said Dec Mullarkey, chief investment officer, Sun Life Financial. "The direct effects will be magnified when business confidence declines and investment decisions are delayed." The markets are still hoping the key players will return to the bargaining table. "
The root of the conflict is Trump's statement that China has long used predatory tactics to try to supplant US technological supremacy These tactics include cyber-theft as well as forcing companies to cede technology in exchange of access to the Chinese market Trump's tariffs are intended to push Beijing to change its habits
The conflict with China is the most important trade dispute that the administration has caused. Is far from being the only one.
Trump also quarrels with the European Union over his threat to tax auto imports and with the Cana da and Mexico on its willingness to rewrite the North American trade pact. And he has submitted most of America's trading partners to tariffs on steel and aluminum.
Many people caught in the initial line of fire – American farmers are taking tariffs on their exports to China, for example – are scared. Soybean prices fell by 13% in the last month because of fears that Chinese tariffs will prevent US farmers in China, which buys about 60% of their soybean exports
"For Soy producers like me hit, "said Brent Bible, a soybean and corn producer in Romney, Indiana. "These rates could make the difference between a profit and a loss for a whole year of field work, and that's only in the short term."
Christine LoCascio, a director of the Distilled Spirits Council, said she feared that China's tariffs on American whiskey "put a damper on US success" of increased exports of American spirits.
Even before the first shots, the prospect of a trade war worries investors. The Dow Jones Industrial Average has lost hundreds of points since June 11. But the risks are now on the market, and the Dow Jones rose nearly 100 points Friday to 24,456.48 [19659015] the dollar over the past month, giving Chinese companies an edge over their US competitors. The decline could reflect a deliberate devaluation by Beijing to signal its "dissatisfaction with the state of trade negotiations," according to a report by the Institute of International Finance, a banking business group.
The Trump administration sought to limit the impact of tariffs on US households by targeting Chinese industrial products, not consumer products, for the first set of tariffs
But this step Increases costs for US companies that use machines or components made in China. And this could force them to pbad on these higher costs to their business customers and eventually to consumers.
If you like Chick-fil-A sandwiches, for example, you can feel the effects. Charlie Souhrada, a North American manufacturer of food equipment, said the tariffs could increase the cost of a kind of pressure cooker used by Chick-fil-A.
The administration placed "directly these taxes on the shoulders of manufacturers and, by extension Consumers," Souhrada said.
One way that tariffs will squeeze farmers, landscapers and construction companies is to increase the price of shovels and loaders made by Bobcat, which uses parts imported from China. US suppliers rarely manufacture these attachments, so the company has to import them.
Jason Mayberry, Bobcat's Deputy General Counsel, said in a brief submitted to the US Trade Representative's office that the company should raise its rates. Bobcat's raw material costs have also increased due to steel and aluminum pricing in the administration.
The Federal Reserve learns that the trade war forces companies to rethink their investment plans. In the minutes of its June meeting, the Fed noted that some companies have delayed or curtailed their plans to purchase or upgrade equipment.
And if Trump extends tariffs to 550 billion dollars of Chinese imports, consumers will not be able to avoid getting caught in the crossfire: taxes would hit products like televisions and cell phones [19659024That'swhathappenedtoimportedwashingmachineswhichwerehitbyseparateTrumptariffsinJanuaryLastyeartheirpricejumpedbymorethan8%
US trade groups urge the two countries to resume talks
"Rates will result in retaliation and perhaps more tariffs", said Jay Timmons. National Association of Manufacturers. "No one wins in a trade war."
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Martin Crutsinger, Editor of AP Economics, contributed to this report.
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Animated Explanation of Trade Disputes:
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