The ongoing trade war between the US and China has stepped up a notch, with Donald Trump announcing a 10% tariff rise on $200bn (£150bn) of Chinese goods.
The announcement will not be a shock to many keen observers and comes after six months of warring between the two countries.
Within hours, China responded with a tariff hike of its own, revealing plans to hike import taxes on $60bn (£46bn) of US products.
But what do the tariff changes actually mean? And how will they affect consumers?
The New Tariff
The latest update is pretty simple: From 24 September, a 10% tax will be added to more than 6,000 types of item being imported to the US from China.
The tariff covers a wide range of finished everyday products such as handbags, rice and fish, as well as items bought by trade industries, including various chemicals, cement, paint and glass products. See the full – ridiculously long – list here.
It’s up to the companies doing the importing to pay the tax, usually at the point when the goods arrive at customs, and they also have to pay any other fees that apply too.
In implementing the higher tariff, Trump is aiming to push the prices of foreign goods up – the hope being that this cost rise encourages US businesses to opt for US-made alternatives instead. In turn, this would increase jobs and business growth across the US… but this isn’t necessarily how things will pan out.
It’s tough to predict exactly what will happen but other plausible, possible knock on effects include product price rises – as businesses pass on the extra costs to consumers – or even job losses, as companies seek to recoup some of their lost cash in other areas.
Pressure From Apple
A number of items expected to be affected by the tariff rise have escaped extra charges (for now), with notable omissions including Apple earbuds and smartwatches.
When Trump announced vague plans for the tariff rise earlier this month, Apple – which assembles most of its products in China, where costs are far lower – sent a cautionary letter to trade officials, stating that “burden of the tariffs” would actually “fall much more heavily” upon US businesses, not Chinese ones.
The letter earned Apple a stern tweet from Trump, who wrote: “Make your products in the United States instead of China. Start building new plants now.”
It’s unclear why their products were omitted in the end, but Apple’s troubles – which are shared by numerous tech companies – are far from over, as many observers have pointed out that retaliation from China could affect their factories in the country.
Writing in the Wall Street Journal, journalist Tripp Mickle said: “Apple’s heavy dependence on the US and China makes it especially vulnerable.
“That reliance [on importing] could make the iPhone and other devices vulnerable if Chinese officials follow through on retaliatory moves to restrict sales of materials, equipment and parts key to US manufacturers.”
Has This Happened Before?
A bunch of times. The ongoing trade war between China and the US has seen various tariffs raised or introduced, with the States kicking things off back in January by placing a whopping 30% tariff on foreign solar panels (which China just so happens to be the main manufacturer of).
A 20% one was also slapped on the first 1.2m washing machines imported during the year – a pricey sum considering China exported more than $400m worth of them to the States in 2016.
In April, China hit back by placing tariffs on 128 products commonly imported there from the States and a month later, the US announced a 25% tariff on $50bn of “industrially significant technology” from China. This tit for tat approach to global economics continued throughout the summer, with both countries announcing more and more additional taxes for each other.
Could It Affect Us?
In July, the International Monetary Fund (IMF) warned that the knock-on effects of the warring could cause huge losses worldwide, with estimates indicating the global economy could be $430bn down by 2020 – which is, y’know, pretty huge.
It’s less clear how the trade war could have an impact on individuals here in the UK but in April, the Guardian pointed out that a lot of the goods made in the US, with parts from China, are sold worldwide. This means we could see price rises for certain products, with technology-related items most likely to be affected.
Could It Affect Us?
In July, the International Monetary Fund (IMF) warned that the knock-on effects of the warring could cause huge losses worldwide, with estimates indicating the global economy could be $430bn down by 2020 – which is, y’know, pretty huge.
It’s less clear how the trade war could have an impact on individuals here in the UK but in April, the Guardian pointed out that a lot of the goods made in the US, with parts from China, are sold worldwide. This means we could see price rises for certain products, with technology-related items most likely to be affected.
In July, The Times noted that one possible effect of a slower Chinese economy could mean fewer tourists from the country visiting – and crucially, spending money – in the UK.
What’s Next?
The new 10% tariff will come into effect on 24 September and unless a new deal is agreed upon, this will rise to 25% in early 2019.
The best outcome would be an end to retaliations, with the US and China sitting down for a good old fashioned, grown-up conversation to put an end to this mess. Sadly, it doesn’t look like that will happen anytime soon and it seems this new announcement may have ruined any chances of talks.
Following Trump’s announcement, the South China Morning Post reported that vice-premier Liu Hu will no longer go to Washington for talks as planned.
Just hours later, in line with their vow to – yes, you guessed it – hit back at any tariff rises with more of their own, China announced its own tariff hike on $60bn of US goods.