Trade War: Trump says tariffs are working

Here's Why Trump Is Hiking Chinese Tariffs To 25%

A container ship was docked at a port in Qingdao, in eastern China's Shandong Province, on July 6.

China has threatened to slap import tax on about $60 billion of us imports, with tax rates ranging from 5 to 25 percent, the country's commerce ministry said on Friday, calling the proposed tariff "rational and restrained".

In response to Donald Trump's indication that he would raise tariffs on over $200 billion of Chinese imports from 10% to 25%, Beijing in return stated that it is preparing retaliatory measures for tariffs on 5,207 different USA imports to China at variable tariff rates ranging from 5% to 25%. But to date there's only been USA tariffs implemented on Europe steel and aluminium imports.

During a July 20 CNBC interview, Trump said that he was willing to put tariffs on all $505.5 billion dollars worth of goods that China exports annually to the U.S. One of the biggest targets of the China tariffs has been farmers; Beijing is the biggest buyer of USA soybeans, importing more than $12.4 billion worth of the oil seed in 2017, according to the Peterson Institute for International Economics.

Friday's retaliation from China suggests that tactic hasn't worked.

There is no evidence, however, that the Chinese government is financing such an advertising campaign in the US.

Protectionist moves by the United States have drawn a response from other trading major partners. For them, the central objective is to block China's economic and technological development under its "Made in China 2025", plan which they regard as the most significant threat to the economic, and ultimately military, supremacy of the US.

Today's threat targeting a smaller amount of US goods reflects the fact that Beijing is running out of products for retaliation due to its lopsided trade balance with the United States. Last year, China imported about $130 billion of United States goods. This makes the products more expensive and less attractive for US consumers.

"Don't underestimate President Trump's determination to follow through".

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Trump initially proposed 10 percent tariffs on an additional $200 billion of Chinese imports, but he told trade officials this week to consider raising that to 25 percent. Tariffs of 2,3 percent hardly represent a tariff war, let alone a trade war.

Chinese authorities warned earlier that if the dispute escalated, they would adopt unspecified "comprehensive measures".

Those "longstanding concerns" centre on two key issues: the acquisition and development by China of advanced technology in the fields of communications, robotics and artificial intelligence; and the state subsides provided to companies.

Xu Hongcai, an economist with the China Center for International Economic Exchanges, said: "Even though the U.S. industrial system is large and comprehensive in general, its manufacturing and consumer sectors have had much reliance on imports for many years".

"Tariffs are working far better than anyone ever anticipated" and would make the U.S. "much richer than it is today", the president tweeted. Washington also wants China to stop subsidising Chinese companies with cheap loans, claiming that this allows them to compete unfairly.

Trump portrays the tariffs as a tax on foreigners, but the reality is that tariffs are taxes on US companies and consumers.

Although Kudlow called China intransigent, he said there were hints of both sides being able to get back around the negotiating table.

Should Trump follow through with threats of $200-$500 billion more tariffs on China imports, the USA and China will likely slip into a currency war as China allows its currency, the Yuan, to devalue further.

It's the first time the fuel has been ensnared by the expanding trade war and billions of USA dollars may hang in the balance. The deficit climbed $3 billion to $46.3 billion in June from $43.2 billion in May, the Commerce Department reported Friday.

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