&a;ldquo;Enough is enough!&a;rdquo;
That&a;rsquo;s what U.S. corporations are telling the Trump administration on Wednesday following a proposed 10% tariff on $200 billion of Made in China goods.
&a;ldquo;The cumulative tariffs that both countries are beginning to implement will harm each other&a;rsquo;s economies and jobs,&a;rdquo; says John Frisbee, president of the U.S. China Business Council, a lobbying firm representing U.S. multinationals in China. &a;ldquo;No one wins in that scenario.&a;rdquo;
Trump slapped $34 billion in tariffs on Chinese goods last week with another $16 billion coming later this month. China retaliated with equal tariffs. The U.S. Trade Representative Robert Lighthizer said the additional threat of $200 billion, announced after market hours Tuesday, was to punish China for its retaliatory tariffs. China could not even impose an equal value of tariffs on the U.S. if it wanted to. Beijing would have to be more creative. Last year, the U.S. exports to China were valued at $129.8 billion, &l;a href=&q;https://www.census.gov/foreign-trade/balance/c5700.html&q; target=&q;_blank&q;&g;according to Census data&l;/a&g;.
&l;img class=&q;dam-image bloomberg size-large wp-image-42104907&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/42104907/960x0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Robert Lighthizer, U.S. trade representative&a;nbsp;(left) speaks with Peter Navarro. Both men see China the same way Trump does: as a threat to U.S. manufacturing and as an unfair competitor in Asian markets. (Photo: Andrew Harrer/Bloomberg.)
On Wednesday, the market was full of headlines speculating on what Xi Jinping could do to retaliate. One way is to attack U.S. services trade&a;mdash;think banks, recently allowed to own mainland broker/dealers outright&a;mdash;and tech companies like Apple. Apple&a;rsquo;s share price fell 1.25% today, worse than the S&a;amp;P 500 and Nasdaq.
&l;p class=&q;tweet_line&q;&g;The U.S. has 6,031 products targeted to hit the $200 billion in new tariffs , according to numbers crunched by Chris Rogers, a research analyst from Panjiva, part of S&a;amp;P Global Market Intelligence. The new proposal is subject to consultation through the end of August. The U.S. China Business Council will have its hands full.
For now, the list is dominated by chemicals, though the products covered are relatively small by value ($7.1 billion, or 3.4% of the $200 billion of imports targeted). Other major categories targeted include textiles (935 lines but notably excluding apparel) and food (925 lines led by fish and vegetables).
By value, the leading categories include electronics ($50.1 billion with 218 tariff lines), capital equipment ($42.0 billion with 200 lines), furniture ($29.7 billion from just 77 lines) and the automotive industry ($12.4 billion with 125 products targeted). The new list comes at the expense of a deeper reliance on China as a supplier for the products concerned, says Rogers.
&a;ldquo;That reduces the options for American buyers to replace Chinese supplies with other overseas providers and increases the risk of supply chain disruptions and higher costs,&a;rdquo; he says.
In the most recent $34 billion list, China accounted for 7.1% of those imports. That rises to 13.3% for the $16 billion list and hits nearly 21% for the $200 billion hit list proposed last night.
For some of the largest products, China&s;s importance as a trade partner is even higher, rising to 49% for IT network gear and a whopping 69.5% for metal furniture.
The tech component &a;ldquo;will likely lead to significant lobbying by IT service companies including Google and Facebook as well as retailers such as Ikea for exclusion of their products,&a;rdquo; Rogers says.
&l;img class=&q;dam-image getty size-large wp-image-916059180&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/916059180/960x0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; An investor watches the electronic board at a stock exchange hall in Fuyang, China. The Shanghai 50 Index is in bear territory, down over 20% since January 26. (Photo by VCG/VCG via Getty Images)
&l;p class=&q;tweet_line&q;&g;The U.S. under Trump is currently fighting a multi-theater trade war. Trump has gone after Europe, Mexico and Canada. But he and his two trade sidekicks, Peter Navarro and Robert Lighthizer, are true believers in China mercantilism being bad for U.S. labor. China is the main target.
While China has been good for U.S. consumers, keeping sneakers and toys cheap, it&a;rsquo;s hurt blue-collar labor, which cannot compete in an outsourced economy against the Chinese on an hourly wage and social benefits basis. Many leading Democrats also believe this, including Senate Minority Leader Chuck Schumer and Vermont Senator Bernie Sanders. Read the headlines about surging Democrats, and besides being soft on immigration, they are also in favor of tariffs and protecting American workers. The Hillary Clinton wing of the Democratic Party has no argument for the economy, and the free traders in the Republican party will have to turn to think tanks for work. Unless this whole trade-war business blows up in everyone&a;rsquo;s face.
To some, by going after China and other trading partners jointly, Trump makes it harder for countries like Germany or Mexico to side with China because it hurts their own, separate trade talks with the U.S.
&a;ldquo;Trump believes that the best way forward is not to avoid a trade war, but to welcome, embrace, and glorify one because he is firm in his belief that&a;mdash;even though there will be economic contraction and institutional ruin&a;mdash;the United States will emerge better off than Europe, Canada, Mexico, Japan, and&a;mdash;most importantly&a;mdash;China,&a;rdquo; says Daniel J. Ikenson, director of Cato&a;rsquo;s Herbert A. Stiefel Center for Trade Policy Studies. Ikenson does not advocate for Trump&a;rsquo;s position.
Meanwhile, the U.S. China Business Council, which has been patient for the last 18 months, is now worried about a more severe Chinese retaliation.
&a;ldquo;Enough is enough. We need to stop the needless escalation of a tariff war and start working on solutions that will address the real concerns that American companies have about China&a;rsquo;s intellectual property protection and technology transfer policies,&a;rdquo; says Frisbee. &a;ldquo;Those are the right issues to focus on, but tariffs are the wrong way to solve them.&a;rdquo;
For Trump, tariffs are the only way to bring people to the table. Only then, if all goes well, will problems get solved.
On Wednesday, famed investor Mark Mobius said a trade war marked the beginning of the global economy&a;rsquo;s march towards financial crisis. He predicted a 10% drop in emerging market equities this year, led by further deterioration out of China.
China&a;rsquo;s mainland equity markets are already down over 20% from their January 26 highs. Investors are likely to pile into the A-shares if Shanghai and Shenzhen fall another 20%. If another $200 billion worth of tariffs are imposed by September, an additional decline of that magnitude is not that hard to imagine.
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