Trump takes the trade war with China to the next level

Trump takes the trade war with China to the next level

Trump takes the trade war with China to the next level

The Trump administration is taking the battle with China to its next logical step. In a fresh move United States President Donald Trump announced new tariffs on $200 billion Chinese imports, indicating a sharp escalation.

The decision was made on a detailed study based on the administration's findings that China has long engaged in unfair practices hurting U.S. intellectual property, including forcing firms to hand over technologies in order to have access to the large Chinese market. Senior officials believe China will not have a choice but to drop prices so that the consumer does not have to pay more or less the same prices and the US government will have more taxes for public projects.

Despite numerous conversations in which U.S. officials have been clear about what they demand in order to avoid the tariffs, Chinese officials have not yet seriously engaged in talks, according to senior administration officials.

The solution to the US challenges, the officials believe, is a successful rewrite of NAFTA and an easing of trade tensions with Europe could help Trump in his trade conflict with China.

What and why the US proposes these taxes?

The tariffs will start at 10 percent, beginning Monday of next week, and then rise to 25 percent in January 2019. Beijing has warned that it would hit an additional $60 billion in American goods if Trump ordered more tariffs.

Administration officials say the tariffs are needed to compel China to modify elements of its state-led economic system that disadvantage private companies.

Does China have a choice?

US officials are confident that China will buckle in the beginning and then fall in line as it needs the $20 trillion U.S. market. Chinese economy will begin to crumble without the business as US has the ability to influence more countries.

The United States last year ran up a $375 billion deficit in goods trade with China, a figure the President blames on Chinese trade barriers. China has more to lose from a trade war, given that it enjoys a trade surplus.

Solar industry impact

A 30 per cent tax was imposed on imported solar panel in a bid to protect domestic manufacturers while signalling a more aggressive approach toward China. The move is a major blow for the $28 billion solar industry, which gets about 80 percent of its solar panel products from imports. The Solar Energy Industries Association predicted the tariffs would increase prices and kill 23,000 jobs.

Suniva and SolarWorld Americas, the bankrupt companies which requested the tariffs, say tariffs would boost domestic manufacturing and add more than 100,000 jobs.

The tariffs unveiled on Monday will apply to all imported solar photovoltaic cells and modules, the main technology on panels that convert solar energy into electricity.

China responds

China said that it has no choice but to retaliate against new U.S. trade tariffs, risking even stronger action from President Donald Trump in an escalation of the trade war between the world's two largest economies.

Many analysts say that the U.S. trade actions against China will not work as China has ample fiscal and monetary policy tools to cope with the impact, a senior securities market official said.

So far, China has either imposed or proposed tariffs on $110 billion of U.S. goods, representing most of its imports of American products.

Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, said three-quarters of its members will be hit by the tariffs, and they will not bring jobs back to the United States.

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