Will new tariffs on China create more fair trade?

It’s no secret that each year, China floods the U.S. market with cheap goods–with many of these products made in conditions that would be illegal in most of the world. Add to that the fact the Communist government subsidizes these products and then adds a tariff on American made goods that are imported into China and you begin to see a problem.

It has gone unaddressed by successive American administrations. Until now.

The White House is cracking down on these improper Chinese trade practices by making it significantly more difficult for Chinese firms to acquire advanced US technology and invest in American companies.

On Thursday, President Donald Trump announced tariffs on $60 billion worth of Chinese goods coming to the United States.

That’s a little more than 10 percent of all Chinese goods sent to the US “We want a reciprocal tax, a mirror tax,” said President Trump. “We are in negotiations and we will see where it takes us.”

The tariffs are the first time the Trump administration has directly targeted China with big trade sanctions

The president has repeatedly accused Beijing of unfair trade practices, like currency manipulation, which helps China make its exports more affordable.

The president has frequently taken aim at China’s huge goods trade surplus with the United States, which reached $375 billion last year.

The move has trigged retaliation from Beijing and has now caused fears of a global trade war.

The tariffs will take effect in the next 30 days. This will allow the US industry to have their say.

“China has taken advantage of us for far too long,” said President Trump. “Not anymore.”

 

Prior to President Trump’s announcement, two groups of American retail and footwear sellers wrote a letter to the president stating why they think the tariffs are a bad idea.

In one letter, 25 of the largest brands in US retail, including Walmart, Target, Kohl’s, Levi’s, Macy’s and more, voiced their concern that any tariff on imports from China “would hurt American households with higher prices and exacerbate a US tariff system that is already stacked against working families.”

That’s because more than 97 percent of shoes and clothes sold in the US are made overseas and then imported and sold in American stores. The clothes are cheap because often times, they’re made by slave labor. That’s a fact that has been a problem for American manufacturers who cannot compete with virtually non-existent labor costs.

The US imports about 1.7 billion pairs of shoes each year, representing more than 70 percent of shoes on store shelves, according to the Footwear Distributors and Retailers of America.

National Retail Federation President and CEO Matthew Shay said, “Holding China accountable for refusing to follow global trading rules is important and necessary, but instead, the tariffs proposed by the administration will punish ordinary Americans for China’s violations.”

“Middle and working-class Americans are just starting to see the benefits of tax reform in the form of bigger paychecks and higher wages,” Shay said. “Engaging in a trade war will erase those gains and result in higher prices for a wide range of consumer products and basic household goods. And the tariffs will create uncertainly for retailers and other businesses who are prepared to reinvest savings from the tax cut in capital investments, wage increases, workforce training and new jobs in communities across the country. We urge the administration to reconsider and instead work with our trading partners to enforce the rules and advance targeted trade remedies.”

 

China Warns US of Trade War

Meanwhile, Beijing has issued a warning to the United States:

“China will certainly take all necessary measures to resolutely defend its legitimate rights and interests,” if the United States imposes new restrictions, the Ministry of Commerce said in a statement on Thursday.

“It’s unrealistic and unreasonable to demand complete equality in trade,” Chinese Foreign Ministry spokeswoman Hua Chunying told reporters on Thursday. “We hope that both sides can sit down and talk calmly.”

Beijing hasn’t offered any specifics on how it could respond, but it does have a number of options.

For example, China is one of the biggest buyers of US crops, including soybeans or sorghum.

China could put a tariff on those crops, or decide to buy more soy from places like Brazil and Argentina. It’s not known if China’s threats are real. China realizes that American produce and grain is the highest quality in the world and the supply is not likely to be disrupted by war or unstable governments. That’s what makes American crops a popular import around the world–stability of the supply. China and other countries, with billions of mouths to feed, cannot rely on an unstable source of food.

Boeing might also be vulnerable in the longer term. It’s the single largest US exporter, after food, and China is a critical market for the company.

Chinese airlines could place more orders for Airbus (EADSF) planes in future.

The Communist nation is also the biggest creditor of the United States.

It owns more US government bonds than any other country. The country recently cut some of its US debt holdings, although investors don’t expect China to immediately dump its US debt in 2017.