Though both the United States and China have been reticent to say they’ve entered a trade war, it’s certainly walking and acting like one.
Calling China’s response to the U.S. tariffs by levying tariffs of its own “baseless” and “unreasonable,” President Trump may be hitting back with yet another punch: $100 billion in additional tariffs against China.
Defending the U.S. position to remedy China’s unfair practices around obtaining American intellectual property, Trump said in a White House-issued statement Thursday that China’s “illicit trade practices” have been the cause of global concern and have cost the U.S. its factories and jobs.
The U.S. tariffs on China spurred by those practices are a means to eliminate them, Trump said. But that doesn’t appear to be the way things are going.
“Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers. In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs.”
In his own statement Thursday, U.S. Trade Representative Robert Lighthizer said, “After a detailed investigation, USTR found overwhelming evidence that China’s unreasonable actions are harming the U.S. economy. In the light of such evidence, the appropriate response from China should be to change its behavior, as China’s government has pledged to do many times.”
China’s most recent set of tariffs on 106 U.S. goods including cotton, came in response to the list of 1,300 products from China that the U.S. said will face tariffs as a result of its Section 301 investigation into China’s forced transfer of U.S. technology and intellectual property. That list of 1,300 includes a majority of the machinery used for textile and apparel manufacturing. Before that—and in response to the U.S. tariffs on steel and aluminum instituted under Section 232 on grounds that the imports threatened U.S. national security—China said it would add tariffs to 128 U.S. products.
Despite not calling these tariff volleys a trade war, both sides have said they’d win were it, in fact, a trade war.
On Wednesday, President Trump said on Twitter, “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!” adding in a separate following tweet, “When you’re already $500 Billion DOWN, you can’t lose!”
In commentary Thursday, Reuters reported China’s Communist Party’s People’s Daily newspaper as saying, “The confidence to know that [China] will win the trade war comes from the scale of [China’s] consumer market.”
More than the threats both sides have launched between them, China and the U.S. have each escalated their concerns with the World Trade Organization.
The U.S filed a complaint with the WTO against China on March 23 (following its order on metal tariffs and ahead of its intellectual property-based tariffs) regarding what it claims has been unfair practices by China related to intellectual property and technology transfer.
China filed a complaint with the WTO Wednesday, claiming the U.S. tariffs tied to its intellectual property practices would fall outside what’s been agreed under the WTO.
What this all means
For now, Trump’s latest $100 billion tariff threat means the door has been reopened as to which products could be targeted—meaning the apparel, textiles and footwear sectors could potentially be facing tariffs beyond those already aimed at manufacturing machinery coming from China and cotton exports coming from the U.S.
“Adding more tariffs would be both stunning and ill-informed,” said Matt Priest, president and CEO of the Footwear Distributors and Retailers of America. “It also means that footwear is back in contention for tariff increases, unless the president is bluffing to get the Chinese to the negotiating table. This is a risky game in our opinion. If we are added to any new lists, shoe prices will go up.”
The United States’ first China-targeted tariffs of $50 billion were expected to only have a minimal impact on American families, Priest explained, but with the potential additional tariffs, it’s unlikely consumers would be able to escape cost increases and those in the agriculture sector could be facing job losses.
Perhaps sensing bubbling concerns among his farmland voter base, Trump alluded to protections for farmers alongside his announcement of the possible new tariffs.
“I have also instructed the Secretary of Agriculture, with the support of other members of my Cabinet, to use his broad authority to implement a plan to protect our farmers and agricultural interests,” Trump said.
Retailers have been on high alert amid these tariff battles as the industry could be hard hit if things don’t settle down to a workable solution.
In a statement Thursday, Hun Quach, vice president of international trade for the Retail Industry Leaders Association, said, “If the Administration follows through on this threat, American families should prepare to pay more for summer clothes, shoes, back to school gear, home décor, holiday shopping—this will hit every season and every category. Tariffs of this magnitude will not only negate any increase from tax reform in worker’s paychecks, but the combination of new taxes on consumers and retaliatory taxes on American exports has the potential to both depress consumer spending and slow down the economy.”
Despite the likely impact on consumers, the present mess being made of trade has the potential for wide-reaching ramifications both for the apparel and textile industry and other sectors outside of it, too.
“It is time to wake up—we are being marched into a trade war and the losers will be American workers, American consumers, and the American economy,” American Apparel & Footwear Association president and CEO Rick Helfenbein said Friday. “The decision to consider an additional $100 billion is far from ‘appropriate.’ Tariffs are hidden, regressive taxes paid for by hardworking American families and result in lost American jobs, higher prices, and damage to the American economy, plain and simple. Additional tariffs only add fuel to the fire and create an environment of one-upmanship that will not solve the problem we are trying to fix. We cannot treat this like a school yard fight. This is a fight where everyone loses.”