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Possible Effects of Tariffs on China

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President Trump’s announcement on March 22 that he aspires to reduce the United States trade deficit with China by $50 billion with new tariffs has been met with much speculation on the expected impact. This announcement follows another report earlier this month that the U.S. will be adding a 25% tariff on steel imports and a 10% tariff on aluminum imports.

Beijing quickly responded with a tariff on U.S. imports worth $3 billion. Despite this deliberate retaliation, it seems as if the biggest changes are yet to come. The resounding question is: what happens next?

Results from these tariff escalations and changes in international trade could include:

 

Consumer Goods

Many commonly-used, highly-consumed products could see an increase in price. Beer, cars, baseball bats, and even a can of Campbell’s soup are all at risk of mild to moderate price inflation. Because of this potential increase on consumer-goods, some are calling the new tariffs a ‘tax on American families’.

 

Manufacturers & Factories

The intent of these steel/aluminum tariffs is to breathe life back into two American industries that have been struggling, as well as raise costs on imported products so that American products become more competitive. However, some fear that there won’t actually be an increased demand on American-made steel/aluminum products, and instead the tariffs will make raw materials more expensive for manufacturers such as Ford, General Motors, and Boeing. This might hurt factory jobs, and some of these manufacturers and workers fear for their job security.

 

Electronics

Many people are holding their breath regarding Chinese electronics. Some experts contend that if China retaliates they would target consumer electronics, which would hurt Apple, and/or semiconductors, which would hurt U.S. companies like Qualcomm and Intel.

 

The Dow

The stock market has also felt repercussions. On the day of President Trump’s announcement, the Dow dropped by 500 points in the first hour. The Dow has since recovered, but with many stockholders still spooked by the tariffs, the stock market continues to remain vulnerable during this time of ambiguity.

 

Trade War?

The one thing we know for sure is it’s not over yet. President Trump made it clear that this is “the first of many” actions he has planned targeting Chinese trade, and Beijing countered this by saying “it is impolite not to reciprocate.” In fact, Beijing has already named this a “fight to the end.”

Additionally, experts are anticipating a second hit from China to come soon considering their first tariff on U.S. imports is a response to the tariff President Trump set earlier in March on steel and aluminum, not the new $50 billion announcement he made on March 22.

Ideally these implications don’t result in a full-blown trade war, however the possibility is definitely there. A trade war could have massive economic impacts on the U.S. and China, and it could also hurt global trade and put pressure on vulnerable economies.

Only time will tell, and we aim to keep our customers apprised with the latest logistics and supply chain news and trends. We will continue to release updates on any changes and how they might affect your success.

05 Apr, 18

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