American consumers are about to find out what happens when trade war rhetoric becomes tariff reality.
The trade war with China now transitions from Trump’s verbal attacks to administrative action, with tariffs on $200 billion worth of Chinese goods now set to begin Monday just after midnight.
China has promised to retaliate with tariffs on $60 billion of U.S. goods if President Trump goes ahead with the increased taxes, which will likely prompt Trump to make good on his promise to hit the Chinese with tariffs on an additional $267 billion worth of goods if they retaliate.
In short, by Monday evening, virtually all Chinese goods coming to the U.S., with a few exemptions, will be levied with a 10% import tariff, which will rise to 25% at the beginning of the year.
Despite the looming danger to the economy, trump and his administration are remarkably sanguine about the outcome.
“We’re going to get an outcome which forces China to behave in a way that if you want to be a power – a global power – transparency, rule of law, you don’t steal intellectual property,” Secretary of State Mike Pompeo said on Fox News on Sunday.
“The trade war by China against the united States has been going on for years,” Pompeo said. “To the extent one wants to call this a trade war, we are determined to win it.”
But there are signs that China is hunkering down for a long, drawn-out conflict. Jack Ma, chairman of Chinese online retail giant Alibaba, last week predicted the dispute could last 20 years.
In recognition of the hardening of China’s line, Beijing called off an effort to renew negotiations with the Trump Administration on Saturday. Chinese Vice Premier Liu He and a mid-level delegation had been scheduled to come to Washington at the invitation of Treasury Secretary Steven Mnuchin.
As if relations weren’t cool enough, the State Department last week imposed sanctions on the Chinese Defense Ministry’s Equipment Development Department and its director, Li Shangfu, for buying Russian combat aircraft and S-400 surface-to-air missiles. The deal allegedly violated sanctions imposed on Russia for interfering in the 2016U.S. elections.
China on Sunday bought a four-page advertising supplement in the Des Moines Register, telling the newspaper’s Midwestern readers that China is now buying its soybean from Brazil. It called the trade war “the fruit of a president’s folly.”
Trump is hoping to force China to abandon some questionable business practices, such as forcing U.S. firms to take Chinese partners and share intellectual property with them, which he says the Chinese firms end up stealing.
Walmart, the largest retailer in the U.S. by sales, has warned that the new round of tariffs on imported Chinese goods could force it to raise prices in thousands of products imported from China.