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News July 06, 2018

New U.S.-China Tariffs Start Trade War

By  John Corrigan

After months of verbal sparring with China over trade policies, the United States has thrown the first punch by officially levying tariffs on $34 billion worth of Chinese goods. U.S. customs officers started imposing the 25% tariffs at 12:01 a.m. on Friday, July 6, ending nearly a quarter-century of integration between the world’s two largest economies. Chinese authorities quickly fired back with tariffs on $34 billion worth of imported U.S. goods.

“The United States violated [World Trade Organization] rules and launched the largest trade war in economic history to date," China's Ministry of Commerce said on Friday. “This kind of taxation is typical trade bullying, which is seriously jeopardizing the global industrial chain and value chain security, hindering the pace of global economic recovery, triggering global market turmoil and will affect more innocent multinational corporations, general enterprises and ordinary countries.”

President Donald Trump has vowed to implement tariffs on an additional $16 billion worth of imported Chinese goods later this month, NPR reported. While the U.S. tariffs are targeting items and products in China’s aerospace, robotics and machinery industries, Beijing is focused on products ranging from vehicles, soybeans and other agricultural products.

China isn’t the only country in Trump’s crosshairs: the U.S. announced several weeks ago that it would be imposing 25% tariffs on steel and 10% on aluminum from Canada, the EU and other countries. Canada responded earlier this week by imposing retaliatory tariffs on U.S. goods worth approximately $12.6 billion (C$16.6 billion), the value of the 2017 Canadian exports affected by the U.S.’s recent tariffs.

A prolonged trade war between the U.S. and China could prove challenging for the promotional products industry, as prices on Chinese-made imported goods would increase. Firms would then have to decide whether to take a hit in their margins or pass the added cost onto buyers.

In 2017, a total of $506 billion in goods were imported from China, meaning the tariffs represent over 10% of the total annual value of Chinese imports, noted Joshua White, BAMKO’s (asi/131431) general counsel and senior vice president of strategic partnerships, in a white paper. White and BAMKO Vice President of Operations Max Levavi discussed the tariff proposals and how they’ll impact the promotional products industry in an exclusive podcast with Counselor in March.

“The potential fallout of the tariff policy includes likely cost increases for a number of different consumer goods and promotional products,” White said. “The tariffs, when combined with the weakening USD to RMB FX rate over the last year, will hurt many suppliers. It underscores the need for relationships with nimble suppliers with diversified manufacturing supply chains.”

In March, Trump proposed these tariffs as part of an intellectual property investigation of Chinese high technology companies. “We must take strong defensive actions to protect America’s leadership in technology and innovation against the unprecedented threat posed by China’s theft of our intellectual property, the forced transfer of American technology, and its cyber-attacks on our computer networks,” said U.S. Trade Representative Robert Lighthizer.