First Round of China-US Tariffs, Retaliatory Measures Takes Hold

At 12:01 a.m. July 6, the additional 25 percent tariffs against Chinese imports across 818 8-digit tariff lines went into effect. Within a minute, China hit back, imposing a 25 percent tariff on 545 tariff lines. The Chinese government said the U.S. has started "the largest trade war in economic history." China said "the duties are typical bullying behavior, which will have a serious impact on the global industrial and value chain and will hinder the pace of global economic recovery, [and] trigger global market turmoil," according to an unofficial translation.

The actions affect a combined $68 billion in trade based on last year's values, but that is small compared to what could come from Washington in the next few months. The U.S. is considering a menu of additional imports that were worth $16 billion last year, and China has its $16 billion second tranche ready, too. The second round from the U.S. is awaiting a public hearing in late July, but President Donald Trump told reporters on Air Force One July 5 that tariffs on those products would go up in two weeks. After the $16 billion, "we have $200 billion in abeyance, and then after that $200 billion, we have $300 billion in abeyance," he said.

The initial U.S. tariffs are mostly on manufacturing inputs and equipment -- and televisions were removed from the list -- but trade groups that aren't yet paying higher prices for consumer goods aren't waiting. "There is no longer a ‘threat’ of a global trade war -- the battle has begun," said Hun Quach, vice president of international trade for the Retail Industry Leaders Association. "These tariffs are officially being imposed on products sold by American businesses, and consumed by American families." RILA referred to retaliation from Europe and North America in response to earlier steel and aluminum tariffs, calling it a three-front trade war in its July 6 release.

The National Association of Manufacturers, which represents companies that will be hit hardest by the first round of tariffs and countermeasures, issued a statement July 6 that called China a cheater, and thanked the administration for championing manufacturing. However, CEO Jay Timmons said, "Tariffs, though, have not and will not solve the existing problems in China. Tariffs will bring retaliation and possibly more tariffs. No one wins in a trade war, and it is America’s manufacturing workers and working families who will bear the brunt of continued tariffs." He said the administration has China's attention, and it should open negotiations now on China's intellectual property theft and unfair trade practices.

The US-China Business Council, which represents U.S. companies with operations in China, also asked the two parties to return to the negotiating table around intellectual property and forced technology transfer. It said that any agreement should have benchmarks so enforcement can happen, but that the penalties should not be tariffs.

The United States Council for International Business said the tariffs will damage the U.S. economy and workforce, "even if they are maintained for just a short time." USCIB CEO Peter M. Robinson said in a statement just after the tariffs took effect: "While we appreciate the goal of the Trump administration to force the Chinese side to make concessions on its poor treatment of U.S. companies, we believe these tariffs will not have the desired effect. Our members are already feeling the impact of earlier [steel and aluminum] tariffs, in the form of rising costs and operational disruptions, and these latest moves will only make matters worse."

An editorial published at the official Xinhua news agency took a hard line, saying China will not negotiate with the U.S. during the trade conflict. "China has made it abundantly clear that it will never surrender to blackmail or coercion. The Trump administration is better advised to drop off its delusion," it said.

Congress, which has been on vacation all week, was largely silent as the tariffs took hold. House Ways and Means Committee Chairman Kevin Brady, R-Texas, did not issue a statement on July 6 on China but did laud a strong jobs report.

Ways and Means ranking member Richard Neal, D-Mass., called the tariffs, and the threatened tariffs to come, "tools in search of a plan. The Trump Administration needs to explain its strategy to Congress and to the American people, including if these tariffs are going to be part of a protracted (trade) war of attrition... . In the absence of an explanation of the Administration’s vision or any congressional hearings, the conclusion we are coming to is that the Administration has no strategy and that congressional Republicans are just fine with that."

USCIB said the U.S. should have worked with its allies to confront China through the World Trade Organization. Instead, China will be asking the WTO to rule the U.S. Section 301 tariffs illegal.