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Trump, China trade war: tariffs imposed, talks break down, no end soon

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  • The US and China imposed another round of tariffs on each
    other on Monday, further escalating the trade war between the two
    countries.
  • All signs indicate their trade war is unlikely to end anytime
    soon, as President Donald Trump is threatening more tariffs and
    China called off planned talks.

The trade
war between the US and China
 has escalated in recent
days, and the likelihood of a near-term solution is quickly
fading.


President Donald Trump’s latest round
of
tariffs
on roughly $200 billion worth of Chinese goods kicked
in on Monday, bringing the total amount of Chinese goods faced
with tariffs up to approximately $250 billion. In response,
Beijing slapped tariffs on another $60 billion worth of US goods.

The new tariffs will
likely push up prices
for
US businesses and consumers
, according to economists, while
also weighing on consumer confidence. It is unclear the degree to
which the inflation would weigh on the broader US economy, but
most experts expect the tariffs to be somewhat of a drag on
growth.

The latest round of tariffs and reactions from Washington and
Beijing have made it clear: the trade war isn’t going to end
anytime soon:

  • Most notably,
    China called off planned talks
    between mid-level officials
    over the weekend, and reengagement appears to be unlikely until
    at least after the US midterm elections in November.
  • This sets up the possibility of no deal to reduce tariffs
    before 2019, which would mean Monday’s tariffs would jump to 25%
    on January 1, 2019, further hurting global supply chains and
    raising prices on US consumers.

  • Trump has been already saber rattling

    about another slate of tariffs on the
    remaining $267 billion worth of Chinese imports.

While tariffs have grabbed the headlines, the fight could spill
out of direct trade channels. One of the reasons that China
decided to cut off talks, according to reports, was the
US State Department’s crackdown
on China’s defense agency for
purchasing goods from a sanctioned Russian arms exporter.

The news website
Axios also reported Sunday
that the Trump administration
plans to begin a public-relations campaign attacking the Chinese
on security issues. According to the report, the US will
highlight Beijing’s alleged attacks, ranging from election
interference to intellectual property theft.

Isaac Boltansky, a policy analyst at the research and trading
firm Compass Point, said the broadside against China and
continued threats of tariffs could trigger a more forceful
response from Beijing.

“China’s retaliation this round was consistent with expectations,
but there is a growing concern that China may choose to employ a
broader suite of retaliatory countermeasures (e.g., higher
comparative tariff rates, stalled regulatory approvals, brand
boycotts, currency devaluation, [selling US Treasurys]) in
subsequent rounds,” Boltansky wrote.

While Trump and Chinese President Xi Jinping are not expected to
speak at this week’s meeting of the UN General Assembly, there is
a chance talks could resume in the coming months during
the Asia-Pacific Economic Cooperation and
G20
 summits.

Any talks would be encouraging, according to Chad
Bown, a senior fellow at the Peterson Institute for International
Economics. But he said that Trump’s lack of a clear goal for the
trade war — outside of vague assertions about the trade deficit —
raises the likelihood that the negotiations could be
fruitless.

“Unlike his frequent tweets and commentary about tariffs,
Trump has not articulated exactly what he wants from China, or
how he wants to achieve it,”
Bown wrote
. “Until the president himself engages on this very
critical question, his administration’s only likely outcome seems
the costly and destructive path of tariffs.”

Chris Krueger, a strategist at Cowen Washington Research
Group, said Trump’s lack of direction means the president is
likely to fall back on
his decades-long preference
for trade protectionism — further
exacerbating the situation.

“Perhaps the midterms soften Trump’s trade narrative,
though our belief is that whatever the outcome Trump will embrace
his one core policy belief and ratchet up the tariffs,”
Krueger wrote Monday. “We are increasingly convinced
that tariffs are not the means to the end, but the
end.”

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