China USA trade and tariffs war, © Alexlmx
© Alexlmx

And so it has come to pass: the US has hiked tariffs on $200bn-worth of imported goods from China – and China has vowed to retaliate. 

Tariffs have now gone up from 10% to 25% on a wide range of goods, set to impact the perishables, chemicals, construction, industrial, electronics, transport and FMCG industries and, for the first time, a wide range of textiles, among other things. 

While today was always the deadline, negotiations between China and the US had led to hopes that Trump’s administration would decide not to impose the additional tariffs.  

However, the increased tariffs will only apply to goods leaving China after the deadline, and will only be implemented once they reach the US, meaning that goods currently on ships will not be affected, and there may be no boost for the air cargo industry. (There is more detail here.)

In fact, as negotiations continue, there is a possibility that air-freighted goods which reach the US quickly could face tariffs that are, in the end, cut. 

That may depend on how the Chinese react. China’s ministry of commerce said in a statement: “The Chinese side deeply regrets that it will have to take necessary countermeasures.” 

The US has said it was also preparing to impose 25% tariffs on an additional $325bn-worth of Chinese goods – essentially nearly all of the total Chinese imports worth some $540bn per year. US exports to China amount to about $120.3bn. But Goldman today said that it thought there was only a 30% chance of tariffs being imposed on the extra goods. 

The news has not gone down well with US manufacturers. Polaris Industries chairman Scott Wine told CNBC: “At 25% it’s downright catastrophic in terms of impact on the company and employees.” 

In an earnings call this week, Emerson Electric chairman David Farr said the dispute was “something we have to manage. I can’t sit here and cry and hold my breath. I’ve got to deal with them”. 

The National Retail Federation, meanwhile, has collated a series of thoughts from small businesses in the US, which claimed the tariffs “undermine growth”, amount to “a tax on the consumer” and make the “made in the US” brand too expensive. 

Cathay Pacific said yesterday it was ready to alter its capacity if need be. 

“For our freighters, we can flex up and down really quickly, cancel or combine services,” said chief executive Rupert Hogg. 

The tariff war could, in fact, just be posturing, believe many observers. Emerson’s Mr Farr said “I still believe we’ll get a deal done. I think the issue really boils down to both parties testing each leader on the give and take. 

“I’m glad to hear they are going to go ahead and meet this week. But I think this is going to go back and forth a couple more times,” he added. 

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  • Joe Alba

    May 10, 2019 at 5:52 pm

    U.S. Companies need to get over their moaning about there own specific problems and understand the overall picture. China has been beating us like a rented mule with unfair tariffs and trade practices since they were permitted to enter the WTO a few decades ago. Since their WTO entry, there has been no retaliatory measures taken by any of our leaders and I think China has been very comfortable with the status quo. We are simply trying to level the playing field, not only with China, but across the globe. This is not a new situation beginning in 2016, this is a situation that has existed since December 2001.