Trump Imposes New Tariffs On Chinese Goods
Just as the protracted U.S.-Chinese trade talks seemed to be nearing a conclusion, President Donald Trump imposed on May 10 a new round of tariffs on another $200 billion worth of Chinese imported goods. The administration threatened still more if the Chinese do not accept American demands on intellectual property and verification procedures. U.S. stock indexes fell 2 percent in response to the news.
If the next round of threatened tariffs goes ahead in June, covering an additional $300 billion of Chinese goods, tariffs will cover virtually all Chinese imports.
The reason, according to Trump and his officials, was that China was threatening to backtrack and renege on already-made commitments regarding intellectual property and verification. In one tweet directed at Chinese officials, Trump said, “You had a great deal, almost completed, & you backed out!”
In retaliation, China’s finance ministry announced that it would raise tariffs on more than 5,000 U.S. products worth $60 billion from the current 5 or 10 percent to 20 or 25 percent. The tariffs will take effect June 1 unless a deal is reached before then.
Despite the tit-for-tat tariff moves, the two sides kept up attempts at talks, with a Chinese delegation arriving in Washington even after Chinese officials concluded the talks would not be substantive. Officials say there is a good chance that Trump and Chinese leader Xi Jinping could meet at the G-20 summit in Japan in June.
Knowing that Trump got strong support from U.S. farmers in the 2016 elections, China’s announced tariffs target even more U.S. agricultural products, including wheat, pork, sugar, peanuts and chicken. U.S. pork producers had been looking forward to making up the shortfall of a massive swine flu outbreak that has decimated China’s swine herds. Pork is by far the most consumed meat in China.
China has fewer goods to target than does the U.S. because of the huge trade imbalance between the two countries. Reducing that imbalance has been one of Trump’s stated goals in the trade negotiations. The Wall Street Journal and other publications report that Chinese leader Xi Jinping is under pressure at home not to seem weak or to concede too much publicly to the U.S.
Business, Farm, Trade Groups Frustrated
Even before the latest round of tariff escalations, U.S. business and farm groups, which have generally supported the goals of the Trump trade war with China, were reacting with increasingly open dismay to its lack of resolution. In April, Forbes magazine ran an article—under the title “Trump’s Tariff War Doing The U.S. More Harm Than Good”—that cited a study by the New York Federal Reserve Bank and Columbia and Princeton universities entitled, “The Impact of the 2018 Trade War on U.S. Prices and Welfare.” That study found that the main victims of Trump’s tariff war were American consumers.
Davie Stephens, a soybean grower from Clinton, Ky., and president of the American Soybean Association, said on May 13, “U.S. soybean farmers remain frustrated by the lack of progress between the U.S. and China in resolving the trade war, which continues to immediately threaten soy prices and, if not resolved, farmers’ ability to stay in business. … The U.S. has been at the table with China 11 times now and still has not closed the deal. What that means for soybean growers is that we’re losing. Losing a valuable market, losing stable pricing, losing an opportunity to support our families and our communities. These trade negotiations are serious for us. Farming is our livelihood.”
“We’ve been understanding during this negotiation process, but we cannot withstand another year in which our most important foreign market continues to slip away and soybean prices are 20 to 25 percent, or even more, below pre-tariff levels,” said John Heisdorffer, ASA chairman and a soybean grower in Keota, Iowa. “The sentiment out in farm country is getting grimmer by the day. Our patience is waning, our finances are suffering, and the stress from months of living with the consequences of these tariffs is mounting.”
Tractor and engine maker Caterpillar said the Trump administration’s steel tariffs had cost it more than $100 million in 2018, and that it expected to pay twice that much this year. Caterpillar blamed weaker-than-expected fourth-quarter results on the tariffs and the slowdown in China, said it planned to raise prices on most of its products by as much as 4 percent.
Mississippi River Cities and Towns Initiative (MRCTI), a coalition of cities and towns along the river, released a statement on the tariffs after a conference call on May 10. “Half of the top 10 soy-producing states in the U.S. are along the Mississippi River, including Illinois, Iowa, Minnesota, Missouri and Arkansas. Not only will additional tariffs directly impact farmers and other facets of agriculture in those states, but also [they] will impact the nation’s freight industry, as 30 percent of all U.S. soybeans are exported to China.”
Frank Klipsch, mayor of Davenport, Iowa, and co-chair of the MRCTI, said, “We just sustained record flooding in our area and have been managing water above flood stage for over 40 days. This is not the most opportune time to prolong the tariff battle and give our soybean growers more bad news. My state ranks second in U.S. soybean production, with soybeans making up 37 percent of total Iowa crop production. The largest single employer in my area is manufacturing for the agriculture industry.”