Donald Trump’s threats to impose tariffs on China could disturb global Markets

Donald Trump’s threats to impose tariffs on China could disturb global Markets

August 06th 2019

The United State threats to impose tariffs on an additional $300bn of market goods from China takes center stage as Trump looks to raise the US-China trade conflict.

On Friday, stocks globally fell hard following Donald Trump’s threat to impose tariffs on Chinese goods worth around $300bn (£247.6bn). The rapid escalation of the new threats from Trump is due to the trade war between the two biggest economies in the world.


The additional pressure from new tariffs looks to force China into a narrowing trade deficit. The United States is pushing for a better trade deficit, the gap between exports and imports, amongst the two nations. Trump’s protest lies in China purchasing less US goods in comparison to what the United States purchase from China. The trade deficit gap in 2018 was worth $419.5bn with Trump also accusing Chinese companies of stealing intellectual property from US firms. He calls for Beijing to make alteration to its rules concerning a business intellectual property.


Market tariffs are border taxes made compulsory by a nation or economic bloc for its trading partners (usually another country) on goods shipment. The idea is to increase the cost of imported goods to make there pricing less attractive when compared to domestic produce. These taxes are paid by the goods trader whenever they cross the border of countries imposing such tariffs.


Trump’s new threat on higher tariffs is looking to get an additional 10% off the Chinese imports’ worth $300bn. The White House before now taxes a 25% tariff on $250bn of Chinese imports. The new addition would imply all Chinese imports to the United States would face a roughly more significant tax payment. Last year alone, China traded goods worth $539.7bn to the United States.


Beijing retaliation to the new tariffs sees its latest implementation of a 25% hike on the $113bn goods imported from the United States. Although, China remains constrained by how far this conflict may go, owing to the fact its good total imports in 2018 from the United States worth $120.1bn.


Nevertheless, the trade war between the two nations has gone beyond tariffs before, more strict regulations at this time could make it more difficult. Both Chinese and US companies are facing difficult times, especially with the recent blacklisting saga of Chinese giant tech firm, Huawei, by the US.


The International Monetary Fund (IMF) has said the global economic growth is affected by the pull from the US-China trade war. In July, IMF noted from its April forecasts the struggle between the US and China would cut growth by 0.1 percentage points in 2019 at 3.2% and 2020 at 3.5% correspondingly.


Global trade growth has witnessed a variety of delays as several pauses get placed on business due to the growing trade uncertainty. A stall on factory output from several nations like Germany, Italy, UK, and more is a visible impact on weak growth during this period. Central banks like the European Central Bank and the US Federal Reserve are facing pressure to reduce its interest rates as a consequence.


The new announcement from Trump comes as a severe surprise to China, who also proclaims they are not intimidated. These moves show no sign of slowing down from either side, thus no quick dissipation insight. Leading economists believe the new tariffs to be a negotiating ploy by the United States president. Such negotiating ploy has flip-flopped before, levitating hopes of a close resolution.


On the other hand, Trump may also expand the trading war to include other countries, along with the European Union. Vehicle import tariffs are already in Trump’s sights, supposedly to protect the United States automobile industry. The imposing car tariffs on the European Union is believed by Economists to dramatically intensify the global trade war and incurring further damage to global growth.
 
How do market tariffs on goods work?
Market tariffs are border taxes made compulsory by a nation or economic bloc for its trading partners (usually another country) on goods shipment.


What is the impact of the latest threat on new tariffs?
Trump’s new threat on higher tariffs is looking to get an additional 10% off the Chinese imports’ worth $300bn. The White House before now taxes a 25% tariff on $250bn of Chinese imports.


What are the other tariffs plan implemented by China?
Beijing retaliation to the new tariffs sees its latest implementation of a 25% hike on the $113bn goods imported from the United States.


How does the US-China trade war affect the global market?
The International Monetary Fund (IMF) has said the global economic growth is affected by the pull from the US-China trade war. In July, IMF noted from its April forecasts the struggle between the US and China would cut growth by 0.1 percentage points in 2019 at 3.2% and 2020 at 3.5% correspondingly.


Is brokering a peace deal imminent?
The new announcement from Trump comes as a severe surprise to China, who also proclaims they are intimidated. These moves show no sign of slowing down from either side, thus no quick dissipation insight.