Strategy

China Hits Back at U.S. in Tariff Tit-for-Tat

Beijing's list of $50 billion in proposed tariffs would hit U.S. exports of soya beans and other farm products particularly hard if they take effect.
Matthew HellerApril 4, 2018

A trade battle that started with the U.S. imposing tariffs on imported steel and aluminum has moved on to tofu as China on Wednesday announced 25% duties on soya beans and other critical American exports.

China accounts for 60% of U.S. soybean exports, according to Goldman Sachs. “That means a major buyer of U.S. soybeans would basically disappear if the [Chinese] tariffs take effect,” The Washington Post reported.

Beijing published its list of $50 billion in proposed tariffs a day after the Trump administration unveiled plans to slap tariffs on a similar value of Chinese-made aircraft parts, cars and car parts, televisions, steel, and more.

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“America’s measures to impose tariffs have violated the rules of the World Trade Organization, and have seriously violated China’s legal rights,” China’s foreign ministry said in a statement.

The Chinese list covers 106 types of American goods, hitting the farm belt particularly hard with tariffs on soya beans, whisky, tobacco, beef, and corn. Soya bean exports from the U.S. to China last year were worth $12.4 billion.

“The question now is whether the two sides will intensify their efforts to punish each other before they sit down to negotiate,” The New York Times said. “Neither set of tariffs go into effect right away, though the exact timing of the Chinese measures was not clear.”

White House economic adviser Larry Kudlow downplayed the prospects of a full-scale trade war, saying, “What you’ve got is the early stages of a process which will include tariffs, comments on the tariffs, then ultimate decisions and negotiations.”

But the Post suggested President Donald Trump is taking a “big gamble” — especially as the vast majority of the parts of the U.S. that would be hurt most by Chinese tariffs voted for him in 2016.

“If protecting U.S. intellectual property is [Trump’s] ultimate goal here, I’m not sure how destroying shareholder wealth, damaging CEO confidence and making the American farmer the main sacrificial lamb here after six years of pain on the farm is going to get us there,” said Peter Boockvar, chief investment officer of the Bleakley Advisory Group.