Analyst Expects Trump to Follow Through on Threatened Additional Section 301 Tariffs

The Trump administration appears likely to follow through with its threat of adding 10 percent Section 301 tariffs on $200 billion worth of Chinese goods (see 1806180058), Ethan Harris, coordinator for Global Economics at Bank of America Merrill Lynch Research, said in a June 20 research report. "Further escalation seems likely," he said. "Once the dust settles on the $50bn in tit-for-tat tariffs between the US and China, we expect the Trump administration to follow through with $100-$200bn in additional tariffs and we expect China to respond in kind. Because China imports less from the US, as they move into this next round they will likely raise tariffs by a higher percentage amount and/or adopt non-tariff retaliatory measures."

Those 10 percent tariffs could affect imported consumer products, which the Section 301 tariffs have mostly avoided so far, Harris said. "Initially, the Trump administration has been targeting intermediate products rather than final consumer goods," he said. "The idea is to avoid headline-grabbing price spikes. Indeed, some consumer products were taken off the original $50bn list for just that reason. The only exception to this is washing machines, whose prices have jumped in response to the tariff," he said. "However, the next $100-$200bn will have to include a bunch of consumer products." U.S. exporters would also be hurt due to likely retaliations, Harris said.