Trade

How the US-China trade war could play out

WASHINGTON — U.S. President Donald Trumps announcement of tariffs on Chinese goods escalates tensions between the worlds two largest economies. The move has stoked business fears of a sustained trade war that could raise prices on American consumers, while heartening some lawmakers who have long called for a tougher stance against Beijing.

Heres what you need to know about the presidents latest trade move:

Whats new about today?

Trump has made a number of tariff-related threats. He has previously put tariffs on washing machines, solar products, steel and aluminum — that the U.S. imports from different parts of the world. Fridays actions are only aimed at China.

Which products are covered by the new tariffs?

A lot, but not a lot. The 25 percent tariffs will be placed on roughly $50 billion in imports from China. The tariffs will cover more than 1,000 types of items, but many of those are very similar manufacturing components. In general terms, they are products containing “industrially significant technologies,” like aerospace, robotics and automobiles.

For context, China exported about $505 billion in goods to the U.S. in 2017, so this hits about 10 percent of goods that come here from China.

How will U.S. consumers and businesses be affected?

Any U.S. business that buys products from China that are covered by the new tariffs will face a tax on those products. Those increased costs will show up somewhere, most likely through decreased profit margins for the companies or increased prices for their customers — perhaps both.

But the administration tried to target products that wouldnt have as big of an impact on American consumers. Goods like televisions and birth control, which had initially been proposed for inclusion, were removed from the final tariff list. Still, Silicon Valley is raising alarms that this will raise the prices for all kinds of high-tech goods. LED screens, printer and scanner parts and sensors: all components of electronics that are among the items on the administrations list.

When do the tariffs take effect?

Tariffs on about $34 billion in Chinese imports will go into effect July 6. The administration is asking for input on an additional $16 billion in products that it wants to slap tariffs on also. Those likely wont go into effect for several weeks.

Why is the administration doing this?

The Trump administration has identified multiple ways Beijing steals U.S. technology and undermines U.S. access to the Chinese market, which are the basis for the new tariffs. Specifically, Beijing makes U.S. companies that want to do business in China jump through more hoops than domestic companies. The tariffs are also intended to punish China for cyberespionage, theft of U.S. companies trade secrets and theft of intellectual property, like patents.

Meanwhile, Chinese companies use government money to buy U.S. businesses. “They can go in and overpay and buy the company and get the technology,” a senior administration official said Friday.

The administration wants the Chinese government to change its ways on all these fronts. But Trump also rails against the U.S.s large trade deficit with China and Chinas high tariffs on certain goods. So any agreement could also target the trade balance more directly.

Is there a way for China to head off these tariffs?

Most of the tariffs take effect in about three weeks, which isnt very much time for Beijing to make widespread policy changes. But the administration has made clear that these tariffs are intended to ultimately pressure China into some type of agreement, so they might not be permanent.

Will China retaliate?

The Chinese government has already promised retaliation in equal measure against U.S. goods including soybeans and imports of four-wheel drive vehicles. On Friday, it called on other nations to join in. If that happens, Trump has threatened to escalate the war with tariffs on an additional $100 billion in Chinese goods.

What else should I be watching out for?

The Trump administration is planning still more trade actions against China, including a set of investment restrictions and export controls that are also aimed at curbing Chinese acquisition of “industrially significant” technology. The White House has said those restrictions will be announced by June 30.

Read this next: US defense secretary talks tough on Russia as Trump weighs Putin summit

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