Trade Deficit Swelling Under Trade Warrior Trump

Alicia Cross
August 4, 2018

After China threatened to impose new retaliatory tariffs on a variety of American goods - everything from beef to condoms - the war of words between Washington and Beijing escalated yet further.

Signalling the nation's readiness to respond to higher tariffs threatened by Donald Trump on $200bn of Chinese imports, officials in Beijing said countermeasures were ready and waiting for the next move from Washington.

While the tariffs imposed by the European Union still remain in place, the bloc has agreed not to implement more while negotiators from Washington and Brussels attempt to thrash out a deal. Washington is expected to soon implement tariffs on an additional $16 billion of Chinese goods, which China has already announced it will match immediately.

Washington imposed 25 percent duties on $34 billion of Chinese goods on July 6.

The two countries have not had formal trade talks since early June.

The US dollar has been strengthening since April as the Fed continues to raise lending rates drawing investors looking for higher returns.

Trump stood outside the White House a week ago and declared victory that he had reduced the trade deficit in the spring, but the figure he was using to make that claim was that there was a slight reduction in the trade deficit from the first quarter of this year to the second quarter.

An all-out trade war could overshadow Trump's otherwise solid economic record of low unemployment and stimulus-fuelled growth.

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A statement said: "Any unilateral threat or blackmail will only lead to intensification of conflicts and damage to the interests of all parties".

"Cooperation is the only right choice for China and the United States", Chinese Foreign Minister Wang Yi said after meeting US Secretary of State Mike Pompeo in Singapore, according to China's official Xinhua news agency.

Washington and Beijing are locked in a battle over American accusations that China's export economy benefits from unfair policies and subsidies, as well as from the theft of American technological know-how.

What do we know about this latest round of tariffs?

The Chinese commerce ministry said it would charge duties on the $60bn (£46bn) of goods that America sends to China each year, in retaliation for the proposed increase in taxes from 10pc to 25pc on the $200bn of Chinese goods that America buys each year.

Trump campaigned on a promise to bring down America's massive trade deficits by renegotiating trade agreements and getting tough on countries like China that sell the USA far more than they buy from it.

The market is not large by value compared with the around $16 billion per year of USA crude that arrives in the country, but those levels could shoot up as Beijing forges ahead with its plan to switch millions ofhouseholds to the fuel away from coal as part of its battle against smog.

"The Chinese are also coping by lowering the rate of the yuan, while the U.S. can look towards countries in Southeast Asia as replacements for its imports, so it's not a big issue", Ye said.

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