Stoking the flames of the relentless trade war between the US and China, earlier today Beijing unveiled a list of $60 billion of some 5,207 goods imported from the United States that will be taxed with extra tariffs ranging from 5 to 25%, should the U.S. follow through on a plan to impose duties on $200 billion of Chinese goods as early as next month.
Here are some facts and figures about the products (via BBG):
- Taxation breakdown:
- 2,493 products fall under the 25% category;
- 1,078 products will be taxed at 20%,
- 974 at 10%
- 662 at 5%
- Liquefied natural gas to be taxed at 25%
- Agricultural products may face levies between 10% and 25%
- Machinery is mainly taxed in 20%, 10% and 5% categories
- Mining, mineral and metal products face tariffs of 10%-25%; natural and synthetic chemicals are taxed under all four brackets
- Sports equipment is mainly taxed under 10% and 20% categories
- Motor vehicles, together with their parts and accessories, fall mostly within the 5% bracket
Will this be the final trade war salvo? Certainly not: in response to China’s sanctions announcement, earlier today Larry Kudlow told Bloomberg that Trump will keep pressing China for trade concessions as the administration views China’s $60BN response as “weak” although together with the last tariff rounds, it pretty much exhausts the amount of imports that China takes from the US in any given year, and so China can’t impose further sanctions even if it wants to.
“We’ve said many times: no tariffs, no tariff barriers, no subsidies. We want to see trade reforms. China is not delivering, OK?,” Trump’s top economic advisor Larry Kudlow said. “Their economy’s weak, their currency is weak, people are leaving the country. Don’t underestimate President Trump’s determination to follow through.”
That said there is some hope for a ceasefire: U.S. and Chinese officials have held “hardly any conversations” in the past month, but there’s “some hint” the Chinese may be warming to the idea of negotiations, Kudlow said. There’s recently been some communication at the highest levels, he also told reporters outside the White House, although with neither leader willing to appear weak, it is virtually certain that unless both parties agree on a ceasefire at the same time, the trade war will continue.
Meanwhile, Chinese authorities – bracing for economic fallout – have taken a range of measures in recent weeks to bolster the economy. On Friday officials stepped in to cushion the yuan, which has been battered by trade tensions and was approaching the key level of seven to the dollar, and the PBOC announced it would impose a reserve requirement of 20% on trading of foreign-exchange forward contracts, making it far more difficult to short the yuan.
Commenting on the Yuan devaluation, which many saw as greenlighted by Beijing, Kudlow said the weaker yuan indicates that investors have questions about the strength of China’s economy, adding a lack of intervention to prop up the yuan is helping cushion the impact of the trade war for China, although that clearly changed in the course of the day.
“Some of the currency fall though, I think, is just money leaving China cause it’s a lousy investment and if that continues that will really damage the Chinese economy,” Kudlow said.
Of course, China’s intervention, apart from being seen as a from of soft capital controls to prevent any further capital flight from the nation by keeping the yuan stable, will also have the result of putting further pressure on the Chinese economy which will no longer be able to offset US tariffs via a weaker currency, effectively providing an easing of monetary conditions for the US.
The full list of US products subject to 25% tariffs is shown below. Unfortunately, China’s Ministry of Finance saw it fit to only provide a non-English version.
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