Trade war: Fresh Chinese tariffs dim hopes for near-term resolution

The trade standoff between Washington and Beijing seems to be escalating into an intense economic warfare. The immediate effect of the latest shot of tariff was a decline in oil prices on Wednesday when China levied a 25% tax on American products worth $16 billion in retaliation against the recent tariffs of similar magnitude imposed by the Trump administration.

Both sides have published the list of targeted commodities, and the tariffs will come into effect on August 23. Industrial equipment like tractors, chemicals and measurement devices like speedometers top the US list. What caught the attention of the market this time is that the Chinese authorities exempted crude oil from their list of 333 US goods, while including other forms of fuels, passenger cars and motorbikes.

Both sides have published the list of targeted commodities, and the tariffs will come into effect on August 23

The second and latest tranche of tariffs has raised the total value of products targeted by both sides to about $50 billion each. According to economists, the most likely impact of the simmering tension in the long term will be price escalation in the local market, which will hurt the finances of both consumers and enterprises.

While the unprecedented shift in trade policies of the world’s largest economies has left economists speculating about its long-term impact, Wall Street and the oil market are keeping their fingers crossed. Soon after reports on the new China tariffs arrived, all major oil indexes slipped and prices dropped about 1%, paring the early gains. Beijing’s tit-for-tat move shows there is no end in sight for the investors’ trade war woes.

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Experts believe that China will find it difficult to match the scale of trade sanctions being proposed by Trump, considering its comparatively lighter exposure to US industries, in terms of imports.  That leaves Beijing exploring other ways to put pressure on its biggest trade partner, going forward. At one point Trump had threatened to levy additional tariffs on items worth $200 billion, or, almost all products imported from China.

Last month, the US government had slapped taxes on $34 billion of Chinese products, prompting the other side to react with sanctions on US products of so much value.

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