US imports affected by China’s new tariffs include coal, oil, vehicles, and plastic products. The tariffs will be activated on August 23. The Chinese Ministry of Commerce said the decision aims to defend China’s interests and the multilateral trade mechanism.
The new US tariffs of 25% will be levied on Chinese semi-conductors, electrical appliances, plastics, and chemical products, and railway equipment which are part of China’s plan to increase its competitiveness.
Tit-for-tat moves
Over the past month, since the US imposed 25% tariffs on 34 billion USD of Chinese imports, the world’s two biggest economies have traded tit-for-tat actions.
The US said it imposed new tariffs on Chinese goods because of China’s unfair trade policy and violation of the technology copyrights of US companies. President Trump campaigned on a promise to reduce the US trade deficit with China.
The US’s latest round of tariffs on 16 billion USD worth of Chinese goods will also take effect on August 23 bringing the total value of Chinese goods facing a 25 percent tariff to 50 billion USD. But Trump will need to take even stronger action to get China to sit down to a negotiation. If the US should impose 25% tariffs on, say, 200 billion USD worth of Chinese goods, not only China and the US but the whole globe will be affected.
Trump also wants to restrict China’s investment in American high-tech companies. 25% of investment offers rejected by the US Committee on Foreign Investment last year were from China.
Competition in technology
The trade tension between the US and China is not simply a “quarrel” over trade deficits but part of a competition in technology and national capacity in the coming years. The “Made in China 2025 Initiative” is a national strategy for China who aspires to become the world’s leader in technology by 2025. The strategy focuses on 10 key sectors such as 5G, cyber security, next-generation IT, high-end digital control tools, robotics, aerospace, and ocean engineering. The initiative is a direct threat to the US in a field that it has been dominating.
Trade between China and the US totals 650 billion USD annually making it one of the biggest bilateral trade relations in the world. The US intention to reduce its trade deficit with China from 375 billion USD a year to 100 billion USD is probably unrealistic. This trade war is maneuvering for the technology struggle that is about to get serious.