The trade war between the U.S. and China took a turn for the worse on May 10 as the U.S. increased tariffs on $200 billion worth of Chinese goods. Tariffs on 5,700 categories of goods increased from 10% to 25% at 12.01 a.m. on May 10, even as Chinese Vice-Premier Liu He was in Washington for talks with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on May 9 and 10. Both sides agreed to continue talks on May 10.
“Talks with China continue in a very congenial manner — there is absolutely no need to rush — as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products,” U.S. President Donald Trump tweeted on May 10 morning.
Things have moved quickly over the past few days with tariffs kicking in days after Mr. Trump said they would, and five days after the administration notified the new rates in the Federal Register. This, despite Mr. Trump saying on May 9 that Chinese President Xi Jinping had sent him a “very beautiful letter” offering to “work together” and “get something done.”
The tariff rate on machinery and technology imports from China , whose value is about $50 billion in value, was already hiked to 25% in 2018 in tit-for-tat tariff rounds between the two countries. The May 10 tariffs for the $200 worth of Chinese imports, “as part of the United States’ continuing response to China’s theft of American intellectual property and forced transfer of American technology”, was set to kick in on January 1 as per a September 2018 announcement from the USTR , but it was held in abeyance as negotiations continued.
In the past, Mr. Trump had threatened to increase tariffs on the remainder of Chinese imports as well, a threat he reiterated on on May 10. The U.S. imported $558 billion of goods from China as per the USTR, with $250 billion attracting 25% tariffs as of May 10.
“The process has begun to place additional Tariffs at 25% on the remaining 325 Billion Dollars,” Mr. Trump tweeted.
Last week, U.S. officials familiar with the discussions had said China had backtracked on commitments, prompting Mr Trump’s decision to impose the new round of tariffs.
China has said, via a Ministry of Commerce statement, that it “deeply regretted” the latest tariff development and has said it will take countermeasures.
American agriculture has felt much of the heat of the tit-for-tat trade war with China. Mr. Trump sought to assuage their concerns on May 10. With an election looming in 2020, the President cannot afford to alienate farmers — most of the top ten agricultural states were won by Mr. Trump in 2016. “Your all time favourite President got tired of waiting for China to help out and start buying from our FARMERS, the greatest anywhere in the World!” he wrote on Twitter.
Tariff increases will also mean U.S. firms paying more for Chinese inputs and those costs will be , at least in partially passed on to American consumers.
