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Why Did Trump Impose Tariffs On China

Are Tariffs A Wise Policy

President Trump threatens to impose US$300b in tariffs on Chinese goods

Most economists say no. Tariffs raise the cost of imports for people and companies that need to buy them. And by reducing competitive pressure, they give U.S. producers leeway to raise prices, too. That’s good for those producers but bad for almost everyone else.

Rising costs especially hurt consumers and companies that rely on imported parts. Some U.S. companies that buy steel, for example, complain that Trump’s tariffs on imported steel leave them at a competitive disadvantage. Their foreign rivals can buy steel more cheaply and offer lower-priced goods.

In 2002, President George W. Bush’s administration placed tariffs on imported steel. A study financed by steel-consuming businesses found that the tariffs cost 200,000 American jobs that year.

More broadly, trade restrictions make an economy less efficient. With lesser competition from abroad, domestic companies lose the incentive to increase efficiency or to focus on what they do best.

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From Free Trade To Fee Trade

Before Trumps trade war, the US boasted some of the lowest average tariffs in the world, with an average duty of 1.6%. That didnt eliminate cheating, but it tended to confine it to some very specific areas: Goods that were subject to additional penalties under global rules designed to punish nations that give unfair advantages to their exporters.

Whether or not those duties get paid is hard to know. When businesses import goods into the US, the information they give to US Customs on its origins is considered a private matter, and not disclosed to the public even if law-breaking is suspected. So US producers have long suspected that more cheating was occurring than being caught.

Theyre probably right: The US Government Accountability Office estimates that since 2001, some $4.5 billion worth of punitive tariffs had been assessed but gone uncollected, largely because of the time-consuming, complex process by which the duties are assessed and collected. And thats on goods theyve already identified as violating the rules.

US manufacturers concerns about customs enforcement have only risen since China joined the World Trade Organization in 2001 and became the worlds export leader and the largest source of US imports. The sheer size of Chinas comparatively cheap labor force re-oriented the global economy around Chinas exports. There is even evidence this revolution led the US to experience new political instability.

Some 3500 Us Companies Sue Over Trump

By David Shepardson

3 Min Read

WASHINGTON – About 3,500 U.S. companies, including Tesla Inc TSLA.O, Ford Motor Co F.N, Target Corp TGT.N, Walgreen Co WBA.O and Home Depot HD.N have sued the Trump administration in the last two weeks over the imposition of tariffs on more than $300 billion in Chinese-made goods.

The suits, filed in the U.S. Court of International Trade, named U.S. Trade Representative Robert Lighthizer and the Customs and Border Protection agency and challenge what they call the unlawful escalation of the U.S. trade war with China through the imposition of a third and fourth round of tariffs.

The legal challenges from a wide variety of companies argue the Trump administration failed to impose tariffs within a required 12-month period and did not comply with administrative procedures.

The companies challenge the administration’s “unbounded and unlimited trade war impacting billions of dollars in goods imported from the People’s Republic of China by importers in the United States,” according to a suit filed by auto parts manufacturer Dana Corp DAN.N.

The suits challenge tariffs in two separate groups known as List 3 and List 4A. List 3 includes 25% tariffs on about $200 billion in imports, while List 4A included 7.5% tariffs on $120 billion in goods.

One suit argues the administration cannot expand tariffs to other Chinese imports for reasons untethered to the unfair intellectual property policies and practices it originally investigated.

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Immigrants Hope Registry Saves Immigration Bill

Among the key findings of the research:

– The economists found a long-term decline in U.S. consumer well-being of 7.8%: Our results show that the trade-war announcements caused large declines in U.S. stock prices, expected TFP , and expected inflation largely by moving macro variables, but also by causing declines in the returns of firms trading with China. We find that markets expect the trade war to lower U.S. welfare by 7.8 percentage points. Total Factor Productivity is the portion of output not explained by the amount of inputs used in production, as defined by the Harvard Business School.

– The decline in stock market value caused by trade war announcements amounted to a $3.3 trillion loss of firm value . That is larger than the $1.7 trillion estimate in the loss of firm value in an earlier paper from the economists.

The data reveal that there were large and persistent movements in stock prices and inflationary expectations following these trade-war announcements, according to Amiti, Kong and Weinstein. We see that the stock market fell on all of the event dates except one U.S. event date and one China event date, with a total drop of 10.4% over all of the events, and 12.9% over the three-day windows . These drops in the market imply substantial drops in expected profitability for U.S. firmsa factor that . . . suggests will drive decreases in the expected wage.

Is A Peace Deal In Sight

Donald Trump asks Beijing to end tariffs on US farm ...

The escalation from Trump was a surprise and China has said it will not be intimidated a sign that the conflict will not dissipate quickly. Economists believe tariffs could just be a negotiating tactic and the US president has flip-flopped before, raising hopes of a resolution. Trump could also expand his trade war to involve other nations, as well as the EU. He has tariffs on car imports in his sights, ostensibly to protect the US auto industry. Economists say imposing car tariffs on the EU would dramatically escalate the global trade war and further damage global growth.

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A Peek At The Process

While our macro analysis is suggestive, digging down to specifics is harder. The new tariffs that Trump issued against Chinese goods come under the authority of a US trade law known as Section 301, which allows the president to impose tariffs to pressure other countries to end unfair trade practices.

Brian Hoxie, the director of customs enforcement at the CBP, told Quartz that his officers are actively enforcing the new tariffs, but cant share specific details. Laws like the Trade Secrets Act that protect the importers rights limit how much information we can put out, he explained.

Other tariffs come with more transparency. In 2015, US lawmakers passed a package of customs enforcement measures in an attempt to sweeten the appeal of the TPP. One gave more teeth to efforts to block the import of goods made with slave labor. Another, called the Enforce And Protect Act, created new transparency around retaliatory duties.

Consider xanthan gum, a chemical harvested from fermenting sugar that is used to thicken everything from salad dressing to the fluids used to drill oil wells. In the US, its key manufacturer is the family-owned company CP Kelco, and in 2012 it alleged that Chinese xanthan gum producers were dumping their products into US markets at unfair prices. US trade officials agreed, and imposed duties ranging from 12.9% to 154.1% on the imports.

Trump Orders Stiff Tariffs On China In Hopes Of Cutting Trade Gap By $50 Billion

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President Trump is announcing new tariffs against China on Thursday.hide caption

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President Trump is announcing new tariffs against China on Thursday.

In a major escalation of the president’s “America First” trade policy, the Trump administration is preparing to impose stiff tariffs on Chinese imports. The goal is to reduce the U.S. trade deficit with China by $50 billion. President Trump is also calling for new limits on Chinese investment in U.S. technology, in an effort to protect what the administration calls America’s “economic seed corn.”

The Chinese government responded with a list of retaliatory tariffs it would impose on about $3 billion dollars worth of U.S. exports, according to Reuters.

“China was considering a 15 percent tariff on U.S. products including dried fruit, wine and steel pipes and a 25 percent tariff on pork products and recycled aluminum, the commerce ministry said in a statement on its website.

“China has assembled a list of 128 U.S. products in total that could be targeted if the two countries are unable to reach an agreement on trade issues, the ministry added.”

The U.S. stock market dropped sharply in anticipation of possible fallout from the trade moves. The Dow Jones Industrial Average tumbled more than 700 points.

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Biden May Leave Trumps China Tariffs In Place

A month into his presidency, Joe Biden has indicated hes in no hurry to undo the punitive trade measure his predecessor placed on China. Biden has announced no policy changes so far, and none of the 32 executive orders he has signed involve China or trade.

Biden will eventually formulate his own China policy, probably with more emphasis on national security, human rights and climate change than under President Trump, who made trade the centerpiece of his China efforts. In the meanwhile, Biden seems increasingly likely to leave Trumps policies in place, including the tariffs Trump imposed on about $250 billion of annual imports from China. Thats something of a surprise to investors who were expecting Biden to quickly break with Trump, as he has on numerous other issues.

Early staffing decisions indicate less of a focus on economic ties and the trade deficit, pointing to a potentially longer than expected timeline to any adjustments in U.S. tariff policy, analysts at investing firm Raymond James wrote in a Feb. 17 research note. Incoming staff do not feel an urgent need to make near-term policy changes, including adjustment to tariffs, as the general sense is they have been less disruptive than originally feared.

Section 201 Solar Panels And Washing Machines

Should Trump continue to impose tariffs on Chinese goods?

In January 2018, the Trump administration announced it would begin imposing tariffs on washing machine and solar cell and module imports as the result of a Section 201 investigation.

Weve estimated that the solar cell and module tariffs amount to a $0.78 billion tax increase based on 2018 import values and quantities of four 8-digit Harmonized Tariff Schedule subheadings, given on page 12 of this report. The United States imported 6.8 billion watts worth a value of $4.9 billion in 2018 under the four subheadings. The 25 percent tariff applies to all imports above a 2.5 gigawatt exemption.

Weve estimated that the washing machine tariffs amount to a $0.59 billion tax increase based on 2018 import values and quantities of six 8-digit Harmonized Tariff Schedule subheadings, given on page 8 of this report. The United States imported $1.29 billion of machines and $114 million worth of parts in 2018. A tariff of 18 percent applies to the first 1.2 million washing machines imported and a tariff of 45 percent applies to all subsequent washing machines as well as parts.

Tariffs on solar panels and washing machines currently remain in place under the Biden administration and account for $1.4 billion of the $78.7 billion in tariff revenues.

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Trump Strategy Failed To Change Chinese Practices

Critics also complain the Trump strategy has failed to change Chinese trade practices. Under the Phase One deal, which is set to expire at the end of 2021, China pledged to purchase an additional $200 billion of U.S. exports. But it has so far fallen about 30% to 40% short of that promise, said Bown, who has been tracking the results of the deal.

“Even with the Phase One agreement, China did not commit to make tremendous amounts of change of the kinds that we’re worried about with its economy, state-owned enterprises, its economic system,” said Bown. “I just don’t think that the United States going at it alone through tariffs is going to induce that kind of change.”

The deal also did not address one of the thorniest issues: subsidies. “The single biggest complaint that the United States has about what China has done is that it’s captured all of this market share and created these huge, huge companies on the backs of government subsidies that are provided to Chinese companies,” said Jennifer Hillman, a senior fellow for trade and international political economy at the Council on Foreign Relations.

U.S. Trade Representative Katherine Tai, left, and Secretary of State Antony Blinken met with European counterparts last week on trade and technology issues in Pittsburgh.hide caption

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U.S. Trade Representative Katherine Tai, left, and Secretary of State Antony Blinken met with European counterparts last week on trade and technology issues in Pittsburgh.

Why Trump Is Right To Target China With Tariffs

President Donald Trump has brought Americas China trade policy further from its past failures than his opponentsand even many neutral, fair-minded observersthought possible.

President Donald Trump has demonstrated beyond reasonable doubt that hes willing and able to disrupt and overhaul a decades-old U.S. trade policy status quo, including with global trade behemoth China. If youre still skeptical, ask anyone involved in American agriculture . Moreover, theres impressive evidence that Trump has thrown the Chinese leadership back on its heelsnotably, its frantic but clueless efforts to enlist in support of its resistance American business and financial elites that manifestly lack any meaningful influence on the presidents thinking.

Now Trump needs to take two more steps in order to achieve a victory that brings maximal benefits to the American economy. First, he needs to make clear a new end-game. Second, he needs a much more effective public relations campaign to counter powerful and growing special interest opposition.

Further, despite fears that the American economy will suffer grievously, too, more and more research portrays the costs as eminently bearablewhether measured in terms of consumer costs and other inflation measures, and especially compared with the stimulus the economy is receiving from the recent corporate and individual tax cuts.

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Why Is Trump Imposing Tariffs On China

Trump is applying pressure to try to force China to narrow the trade deficit the gap between imports and exports between the two countries. He complains that China buys fewer US goods than the US buys from China, a gap worth $419.5bn last year. He has also accused Chinese firms of stealing US companies intellectual property and called for Beijing to alter its rules.

Section 301 Chinese Products

Heres Why Apple Watch Was Exempt From Trumps $200B China ...

The United States is currently imposing a 25 percent tariff on approximately $250 billion of imports from China and a 7.5 percent tariff on approximately $112 billion worth of imports from China.

Under the Trump administration, the United States Trade Representative began an investigation of China in August 2017, which concluded in a March 2018 report that found China was conducting unfair trade practices. The same day, President Trump announced tariffs on up to $60 billion of imports. The administration soon published a list of about $50 billion worth of Chinese products to be subject to a new 25 percent tariff. Stage one of the tariffs began July 6, 2018, on $34 billion worth of Chinese imports, and stage two, the remaining $16 billion, went into effect August 23, 2018. These tariffs amount to a $12.5 billion tax increase.

The Trump administration imposed stage three of Section 301 tariffs in September 201810 percent on $200 billion worth of goods from China. This stage was scheduled to increase to 25 percent beginning in January 2019, but the increase was delayed until it was allowed to go into effect in May 2019. Other tariffs threatened on China under the previous administration include:

Section 301 tariffs on China currently remain in place under the Biden administration and account for $70.9 billion of the $78.7 billion in tariff revenues.

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