Additional 10% Tariffs on $300 Billion will Commence September 1st…
Germany’s DAX down 2.5% while the Hang Seng Index loses 2.35% after Trump’s Tweets and Threats. China says they will respond in kind: “If the U.S. is going to implement the additional tariffs, China will have to take necessary countermeasures,” Hua Chunying, China’s Foreign Ministry spokeswoman said at a briefing in Beijing on Friday: “China won’t accept any maximum pressure, threat, or blackmailing, and won’t compromise at all on major principle matters…”
The DJIA was up more than 300 points on Thursday, when the announcement was made, then it ultimately ended the session down 280. The new tariffs are on the 300 billion in goods that have been, until this point, coming into the country without a toll. There are also 250 billion in Chinese goods that already have a 25% levy attached.
Recent trade negotiations in Shanghai concluded on Wednesday with little or no progress. Talks are scheduled to resume in September.
Speaking on July 30th, before reporters Trump speculated that China may be thinking of delaying a resolution until after the election in 2020, saying:
Calling the tariff a “small additional levy” Trump also said in a series of tweets that China’s promise to buy large amounts of agricultural products from the US, was not kept.
While speaking to reporters this afternoon at the White House, he also threatened to lift the percentage to 25% and beyond, “But we are not looking to do that, necessarily”.
Products that will be included in this new batch of tariffed goods will be consumer electronics such as iPhones, toys and shoes, among other items.
There was some surprise noted, as the meetings and discussions in Shanghai appeared to end on a somewhat positive note, initially. Now, with this announcement, there is a sense of the talks having fallen short of any progress at all.
Fallout of the Trade War to Begin Hitting Home
Trump continues to claim that China will pay these levies, although studies have shown that the consumer in the US will ultimately pay through higher costs on all tariffed goods. The higher prices will also harm sellers in the US due to a reduced volume of sales.
While there is sill also a lot of “carrot” talk, how the negotiations can also take a turn for the better at any time, coming from both sides, it does not appear that there is much substance to be gleaned from these pronouncements.
Since the percentage of some of the products that will be affected, such as toys, include as high as 85% currently coming from China, these tariffs can have a substantial effect on the marketplace.
Also, possibly unintended beneficiaries to the trade war are neighboring countries such as Vietnam and Cambodia, that are already showing signs of increased activity due to the shifting of origin of manufacturing to those countries in order to avoid the levies.
Tariff-man is staying true to his self-given moniker and in September, as the next wave hits, it is yet to be seen what the economic effects will be, either in China or here in the US.
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