Don't Panic: Here's Why Trump's China Trade War Won't Happen

Jermaine Castillo
June 20, 2018

Asian and European stock markets tumbled Tuesday on rising fears of a trade war after US President Donald Trump threatened fresh tariffs on Chinese imports and Beijing warned of countermeasures.

Trump is moving forward with the measures after months of sometimes fraught shuttle diplomacy in which Chinese offers to purchase more American goods failed to assuage his grievances over a widening trade imbalance and China's aggressive industrial development policies.

Although Mr. Trump's audience applauded his comments on tariffs at the annual National Federation of Independent Business conference, the renewed trade hostilities between Washington and Beijing are spooking many sectors of the USA economy, from Wall Street to the agricultural heartland.

"China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology", Trump said in the statement. Three people close to Apple, who remained anonymous because they are not authorized to speak for the company, say that the tech giant's top worry is that the Chinese wreak havoc with Apple's supply chain by forcing suppliers to provide pointless paperwork in order to gum up the works.

China's tariffs had themselves been a reaction to Trump's announcement on Friday that the US would be imposing a 25 percent tariff on $50 billion of Chinese goods.

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China's Commerce Ministry on Tuesday criticized the latest threat of tariffs, saying it was an "act of extreme pressure and blackmail that deviates from the consensus reached by both parties after many negotiations, and is a disappointment to the global community".

"If the U.S. loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures and retaliate forcefully", it said.

The Trump administration's new tariffs focused mainly on industrially manufactured goods like machines, robots, motors, medical devices and pharmaceuticals.

China's Commerce Ministry fired back in a statement, "The United States has kept changing its mind and now launched a trade war".

The Trump administration has announced plans to target products from China including machinery, electrical goods and vehicles.

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The dollar fell 0.45 percent to 110.06 yen following Trump's tariff comments.

Tom Orlik, chief economist at Bloomberg Economics, said that in the event that China's exports to the US weaken in the face of tariffs, the government would likely seek to offset the growth impact with a combination of subsidies to support domestic demand and higher infrastructure investment. It also scrapped agreements to narrow China's trade surplus with the United States by purchasing more American farm goods, natural gas and other products. And Beijing says it would impose tariffs on $16 billion more if the United States does so, too.

In announcing the possibility of new $200 billion in tariffs, Trump mentioned that he still has an "excellent relationship" with Chinese president Xi Jinping.

"This is a trade dispute - nothing more, nothing less", Mr Navarro said.

"It's time, folks", Mr. Trump said.

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If the tariffs the two countries have threatened to slap on each other's exports take effect, their consumers would have to pay higher retail prices.

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