Another Day, More Tariff Fallout

Just days after President Donald Trump confirmed that the 25% tariff on Chinese imports worth $50 billion would go into effect on July 6, 2018, he  further escalated the trade war with China by announcing a list of $200 billion worth of Chinese imports which would be subjected to a 10% tariff. This was announced after China said that it would retaliate against the new U.S. tariffs by announcing their own tariffs on a similar value of US exports to China. All of this back and forth is having a negative effect here in America.

The latest backlash comes in the form of legendary American motorcycle manufacturer Harley Davidson announcing plans to move production of bikes destined for the European market to Europe. The European bloc raised its current 6% tariff to 31% in response to Trump’s latest salvo in the escalating trade war. “Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option,” the company stated in a regulatory filing on Monday. Harley-Davidson’s (HOG) stock fell 6%. The company estimates that the new tariffs would cost over $100 million as the cost to export each bike would increase over $2,000. “The tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region,” the company said.

Trump claimed that by announcing retaliatory tariffs against U.S. exports, China was trying to ensure that it always had an unfair economic advantage with the U.S. Trump also accused the Chinese of using unfair trade practices while acquiring American technology and intellectual property and not compensating those who developed the technology fairly for their effort. He also threatened that in a third round of tariffs, a tariff of 10 % would be imposed on a further $200 billion of Chinese imports if the Chinese government imposed any more tariffs on American goods.

Secretary of State Mike Pompeo has also accused China of being an economic predator, involved in IP theft and flooding the market with cheap steel and aluminum. He said that the increase in import duties on Chinese goods was long overdue. The Chinese foreign ministry said that though China did not want a trade war they were also not afraid to continue the ongoing tit-for-tat with the U.S.

President Trump indicated once the legal process for the new tariffs is complete they could be implemented immediately if China does not change its trade practices and continues with its retaliatory import duties on American exports. He claimed that the trade relationship between China and the U.S. should be more equitable. Trump claimed that he had an excellent relationship with the Chinese president Xi and had worked with him on many issues. However, he said that the United States will no longer tolerate an unfair trade relationship with China and other countries. The Chinese commerce ministry criticized the latest threat of tariffs on $200 billion imports, labeling it as blackmail to apply great pressure and threatened strong countermeasures.

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