China tariffs: What's behind them, who stands to be hurt?

Larry Kudlow REUTERS  Kevin LamarqueMore

So far, the United States has imposed tariffs on $50bn worth of Chinese products to pressure China to make sweeping changes to its trade, technology transfer and high-tech industrial subsidy policies.

China had in August said it would retaliate with $US60 billion in tariffs on U.S. goods, but has since gone quiet on the threat.

The lack of unity within the U.S. administration on trade isn't new - Chinese and American officials have held a series of talks over the dispute, and reached at least one agreement which was subsequently abandoned by the president.

The White House says it has made it very clear what the USA expects from China regarding trade, but since the country has not complied the president slapped Beijing with more tariffs.

What's behind the US-China rift?

USA officials say those violate Beijing's market-opening commitments and worry they might erode United States industrial leadership. For all of Trump's talk of a deal he also makes clear he loves tariffs and the power he wields to impose them.

The tough talk and fear of more tariffs and retaliation rattled investors and sent indexes dropping.

The officials said China had been given "chance after chance" to change the trade practices considered unfair to U.S. businesses, but "have remained obdurate".

In announcing the latest levies on Monday, Trump hinted at that argument again, pointing to his "great respect and affection" for Xi Jinping, his Chinese counterpart, and raising the possibility of a negotiation.

Well-known Queens-born Israel advocate killed in West Bank
Israeli medical teams arrived to treat the victim, identified as a 40-year-old with multiple stab wounds in the upper body. Israeli forces killed over 260 Palestinians in that period, of which Israel says most were attackers.

Kudlow also said he did not expect the Congress would be able to make the Trump administration's recent individual tax cuts permanent before the November 6 midterm congressional elections.

Earlier Monday, White House chief economic adviser Larry Kudlow said at the Economic Club of New York, "We are ready to negotiate and talk with China any time that they are ready for serious and substantive negotiations" to reduce trade barriers. The White House had no immediate comment on Monday. The rand has fallen almost 10 per cent since the previous Monetary Policy Committee meeting in July and while the Reserve Bank does set a target level for the currency, the likely impact of the rand's decline on inflation could prompt the bank to lift the country's interest rate. The lack of progress and collapse of that deal have made future negotiations more hard, as it's unclear who speaks for the USA administration and there's a lack of confidence that any deal will be honored.

"It appears that the administration responded to some industry concerns, but for many American businesses and consumers this still represents a rapid acceleration of costs and much higher uncertainty", said Rufus Yerxa, president of the National Foreign Trade Council.

Initial reaction from the business community Monday was unfavourable. "I think that kind of tactic is not going to work with China".

The tariffs also threaten to undermine the prospect of any further talks any time soon with Beijing. However, without these tariffs, we will be facing an unfair disadvantage.

In a pair of tweets, Trump continued to make the case that tariffs largely harm the countries that are taxed, saying the impact on the USA economy has been "almost unnoticeable". He added that if China retaliates then there'll be another $267bn in tariffs coming. In a win for Apple, consumer electronics like smartwatches and bluetooth devices were removed.

He held up China as a case in point after reaching a new trade deal with Mexico earlier this month.

"With a narrowing focus on the U.S. midterm elections (Nov 6) and U.S. politics - as well as fast-money investors holding substantial aggregate long USD positions - we think the market narrative over the next few months could well transition from "default to the dollar" to "ditch the dollar", says Viraj Patel, an FX strategist at ING Group.

Until now the president argued he was using tariffs as a tool to force USA trading partners to the negotiating table.

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