U.S. threatens China with new tariffs; trade tensions escalate

There appears to be no end to the squabble between the U.S. and China over trade and tariffs. After China’s tit-for-tat response on the $50 billion-exports tariffs issue, the Trump administration has gone a step further and declared that if China were to continue on its current path, the U.S. would slap tariffs on another $200 billion of Chinese products. President Trump has directed his team to pick out Chinese goods worth $200 billion for an extra 10% tariff.

China is not one bit happy with the current move and blamed the U.S. for resorting to undue pressure and extortion. Beijing stated that if the U.S. continues to behave irrationally and bring out any such list, China would be compelled to strike back with a similar move. Meanwhile, the increasing trade tensions between both countries are giving companies and stock markets nightmares over possible supply chain disturbances.

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The tariffs, which will be rolled out in phases with one phase set to take effect early next month, are said to be in retaliation to China’s unfair methods in acquiring U.S. intellectual property and technology and its reluctance in changing these practices. The new tariffs are subject to review like its predecessors and will be pushed forward if China refuses to mend its ways and if it proceeds with its own set of tariffs on U.S. goods, which are expected to affect agricultural products, seafood and cars.

The tariffs are said to be in retaliation to China’s unfair methods in acquiring U.S. intellectual property

However, experts believe that these tariffs are likely to hurt American consumers and businesses more by raising prices and making procurement of parts and components difficult. Chinese exports to the U.S. are far higher than the other way around and so Beijing would have to adopt other tactics to retaliate against Trump’s tariff war, like targeting services.

That possibility will prove to be a headache for many leading American companies that generate significant amounts of revenue from China like Apple (AAPL) and Boeing (BA). Apple CEO Tim Cook is said to have met the president and discussed the negative effects of the trade policies on his company and Trump appears to have assured him that iPhones will be spared from the tariffs.

Battered by the recent trade war tensions, European and Asian markets plunged today. Dow Futures tumbled more than 350 points. The commodity market was also badly hit by the turmoil.

A trade war with China is never a good idea and one of the reasons for this is that the U.S. depends extensively on China for healthcare-related products like vaccines, diagnostics equipment and even hearing aids. Some economists believe that the exchange of tariffs is not the right way to deal with China. They feel the U.S. should team up with its allies and rewrite the rules of trade with China if a fair deal is to be gained by all. Until that happens, this war is likely to go on.