These U.S.-China tariffs might not be here to stay

US shooting itself in the foot with economic blackmail against China’ – Beijing

Lee Jae Won Reuters

Bloomberg news reports that talks to avoid a trade war have stalled in part over USA demands that China reduce state support for high-tech industries.

Opening shots were fired at 12.01am this morning as Washington stuck to its deadline and began imposing tariffs on $34bn of Chinese goods.

"Retailers have already made the buying decisions for what will be on the store shelves in the fall for Christmas holidays", said David French, senior vice president of government relations at the National Retail Federation.

Analysts are also concerned about the impact on others in the supply chain and about an escalation of tensions between the United States and China in general. The Chinese authorities have imposed 25% duties on imports from the United States worth about $34 bln a year, according to a statement by the Main Customs Administration of the People's Republic of China. Trump is already eyeing another $16 billion of Chinese goods and suggesting the final total could top $500 billion, more than the US bought in 2017. That would capture about 80 percent of all Chinese imports and ensure some sneakers, clothing, smartphones and even toys would be targeted. "Hopefully, our product line never shows up on one of those list of tariffs".

"The tariffs are aimed at patent-intensive industries that rely on global supply chains, disadvantaging American producers and harming USA allies operating in the region", the PIIE analysis concludes. Atkinson says he'd likely have to raise prices, which would decrease demand - a big risk during the critical holiday shopping season. US and Chinese companies will now find it costlier to trade with each other, meaning less demand and higher prices.

"It would have a trickling effect all the way down", Atkinson said.

Beijing has made the semiconductor sector a key priority under its "Made in China 2025" strategy, which has intensified after a USA ban on sales to Chinese phone maker ZTE Corp (000063.SZ) underscored China's lack of domestic chips. In the toy industry there are few options outside of China, especially with more complicated items.

The administration has placed "these import taxes squarely on the shoulders of manufacturers and, by extension, consumers", Souhrada said.

"It's still hard for me to believe the Trump administration could develop and negotiate an overarching package with China that genuinely sticks", Kennedy said.

According to the US Customs and Border Service, the United States on July 6 at 00:01 local time, introduced the first installment of 25% import duties for 818 items of Chinese goods for the total amount of $34 bln.

China says that it has been "forced to take a necessary counterattack" against the United States because of recent USA import taxes on Chinese products.

Because of this first round of hostilities, American businesses and, ultimately, consumers could end up paying more for such Chinese-made products as construction equipment and other machinery.

Shaun Rein, managing director at the China Market Research Group in Shanghai, said the Chinese government's next play could be to stoke anti-American sentiments among consumers - similar to the boycotts it ordered a year ago on South Korea's Lotte Group, which caused dozens of the company's convenience stores to shutter.

China also promised that it would respond with trade restrictions of its own to counteract Trump's decision.

There are fears that the tariffs will hit U.S. jobs as well.

"These tariffs are ill-conceived and totally inappropriate", Heck said.

Some economists warn that an all-out trade war would put the brakes on the USA economy by eroding business confidence, interrupting supply chains and increasing costs of imports to US companies and consumers.

In contrast, China imports only about $125 billion worth of goods from the US. But if he's wrong, what lies ahead is "uncharted territory", with the potential for severe economic effects.

"Businesses can adjust to nearly anything, except uncertainty", said Hannah Kain, CEO of Alom Technologies Corp., a supply chain management company.

The Chinese side sees Trump's threats as an attempt to hold back its economic growth - and has vowed to match them move for move.

Doni Holloway and Lisa Wolfson contributed.

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