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US-China trade row: What has happened so far? US-China trade row: What has happened so far?
(2 months later)
Donald Trump campaigned for election on a promise to make trade fairer for the US, and his push to do so has him fighting with some of America's oldest trading partners.Donald Trump campaigned for election on a promise to make trade fairer for the US, and his push to do so has him fighting with some of America's oldest trading partners.
He has already imposed - or threatened to impose - taxes on imports from China, Mexico, Canada and the EU, to encourage consumers to buy American products. The US has been embroiled in a tit-for-tat trade battle on several fronts over the past few months.
Those countries have all promised to retaliate, sparking fears of an all-out trade war. The one that's creating the most interest is the one with China, as the world's two largest economies wrangle for global influence.
Mr Trump's hard line on trade, which saw him withdraw from the Trans-Pacific Partnership trade pact (TPP) last year, marks a striking change from the free trade policies that have governed the exchange of goods for decades. China has accused the US of launching the "largest trade war in economic history."
Mr Trump has imposed taxes on imports from China, Mexico, Canada and the EU, to encourage consumers to buy American products. All of these countries have retaliated.
The US president's hard line on trade, which also saw him withdraw from the Trans-Pacific Partnership trade pact (TPP) last year, marks a striking change from the free trade policies that have governed the exchange of goods for decades.
Here's what's gone on so far.Here's what's gone on so far.
Trump takes on ChinaTrump takes on China
In January, the US slapped controversial tariffs on imported washing machines and solar panels, which was seen as Trump's most significant trade move since his decision to pull the US out of the TPP and renegotiate the North American Free Trade Agreement (Nafta). The US slapped a 25% levy on $34bn worth of Chinese goods on 6 July.
After a lot of to-ing and fro-ing, Mr Trump then said in June he would impose tariffs - or import taxes - on $50bn-worth (£38bn) of Chinese goods. The first tariffs are due to come into effect on 6 July. Mr Trump says he wants to stop the "unfair transfers of American technology and intellectual property to China" and protect jobs.
Mr Trump said this would stop the "unfair transfers of American technology and intellectual property to China" and protect jobs. Tariffs, in theory, will make US-made products cheaper than imported ones, so encourage consumers to buy American. That should boost local businesses and support the national economy.
Tariffs, in theory, will make US-made products cheaper than imported ones, so encourage consumers to buy American. That will then boost local businesses and support the national economy. However, China did not take the move lying down, and retaliated in kind. This has opened the way for tit-for-tat tariffs and threats between the two economic powerhouses.
Businesses will have pay a 25% additional tax on certain Chinese products they import - including aircraft tyres and commercial dishwashers. Since the opening salvo, the dispute has only escalated.
China did not take the news laying down. It retaliated in kind, saying it too would collect a 25% levy on $50bn worth of US goods, also starting on 6 July. Taxes will be charged on imports of agricultural products, cars and marine products from the US, to name a few. Mr Trump published a list of $200bn worth of products to be taxed, said the US would impose a much higher tariff than originally planned on those products and even threatened to tax all of China's imports into the US.
Upping the stakes, Mr Trump then threatened to slap a 10% levy on an additional $200bn of Chinese goods if China "refuses to change its practices". He ordered his staff to identify a list of Chinese goods to be taxed. Chinese officials accused the US of "unilaterally" heightening tensions between the two economic giants, and have vowed to retaliate.
China said it would respond with measures of a "corresponding number and quality" if the US issued the list. Lower level officials from the US and China are due to meet in Washington this week to discuss the trade fight as a second round of trade tariffs is due to come into effect on 23 August. Both the US and China are due to impose tariffs on $16bn of one another's products.
Is its beef only with China? The dispute dates back to January, when the US slapped controversial tariffs on imported washing machines and solar panels. That was considered Mr Trump's most significant trade move since his decision to pull the US out of the TPP and renegotiate the North American Free Trade Agreement (Nafta).
Is the US only in a dispute with China?
No.No.
The US has already started charging levies on the imports of steel and aluminium from the European Union, Mexico and Canada. Earlier this year, the US started charging levies on the imports of steel and aluminium from the European Union, Mexico and Canada.
US businesses have to pay a 25% tax when they import steel from those places and a 10% levy to buy aluminium from them.US businesses have to pay a 25% tax when they import steel from those places and a 10% levy to buy aluminium from them.
The EU, Mexico and Canada were all outraged and vowed to fight back. But these tariffs led to retaliation.
The EU said it would enact retaliatory tariffs on some €2.8bn (£2.5bn) worth of US goods including jeans, motorbikes and bourbon whiskey. These are due to come into effect on 22 June. The European Union imposed tariffs on €2.8bn worth of US goods in June on products such as bourbon whiskey, motorcycles and orange juice.
Canada is planning countermeasures on C$16.6bn ($12.5bn; £9.5bn) worth of US goods from 1 July. It will slap a 25% tax on some US steel products and it plans a 10% levy on varied items including yoghurt, whiskeys and coffee. In June, Mexico announced new tariffs on US products, including whiskey, cheese, steel, bourbon, and pork.
Mexico has also released a list of products on which it will impose tariffs, including pork and cheese. Businesses will also have to pay a 25% duty to import some American steel products. Canada imposed retaliatory tariffs on 16.6bn Canadian dollars-worth of US products on 1 July.
Who has been worst affected so far?Who has been worst affected so far?
Given that the US buys nearly four times as much from China as it sells to them, China is limited on how far it can retaliate through trade. The International Monetary Fund says an escalation of the tit-for-tat tariffs could shave 0.5% off global growth by 2020.
There is some media speculation it could opt for alternatives measures, including taking action against US companies in China and devaluing its currency to fight back. A lower-value yuan would make it cheaper for foreigners to buy Chinese exports abroad, somewhat offsetting the upward pressure on prices caused by the US levies. Separate releases recently indicated growth in China's manufacturing sector slowed in July and one measure of US consumer sentiment falling due to tariff concerns.
While the impact of the growing trade spat on the US and China economies is expected to be small, analysts are concerned about its escalation. Morgan Stanley estimates that a full-blown escalation of the trade dispute could knock 0.81 percentage points off global gross domestic product. This scenario would involve the US slapping 25% tariffs on all goods from both China and the EU, and similar measures imposed in response.
This is already hurting stock markets. Among companies, the car industry seems to have been the most affected so far. Major carmakers recently warned that changes to trade policies were hurting performance.
"The direct impact of the Trump administration's 25% tariff on Chinese goods will actually be somewhat limited, but the risk of subsequent tit-for-tat retaliation on both sides is no small matter," Japanese financial services group Nomura said in a research note. Ford and General Motors have lowered profit forecasts for 2018, citing higher steel and aluminium prices caused by new US tariffs.
Companies are also getting worried. Carmaker Daimler has said it expects earnings from car sales to be "slightly below the previous year", because the tax will make their cars more expensive for consumers in China, a key market. There are also concerns that the trade war could hurt other aspects of US-China relations. Mr Trump recently accused China of manipulating its currency - a sign that the row could be spreading to foreign exchange markets.
There are also concerns that smaller countries further down the supply chain could be caught out. Smaller Asian countries further down the supply chain could also suffer. According to the Economist, 30% of the value of the goods China exports to America originates from third-party countries.
According to the Economist, 30% of the value of the goods China exports to America originates from third-party countries
Japan, it says, is the country that exports most to firms in China that export onwards to America.