China ready to pay any price in trade war with US

Jenna Warner
April 9, 2018

In a trade war, US consumers would probably see higher prices on TVs, shoes and other "made in China" items at stores, the stock market would continue to sink, and businesses might decide that they don't want to make as many new investments after all, because they don't know what the tariff situation is likely to be in the coming months. This in turn drew an nearly immediate reply from President Donald Trump, who ordered US Trade Representative Robert Lighthizer to consider expanding the existing protectionist measures by a further $100 billion a day later, citing "unfair retaliation" by the Chinese.

The ravaging trade war, which was unleashed by the United States in March, when in a shock announcement President Donald Trump said the USA would set a new tariff of 25 per cent on steel and 10 per cent on aluminium imports.

The complaint is valid, but a trade war would be a reckless overreaction. "So essentially if this becomes a reality two months later, this will be a disastrous situation for US agriculture".

Before the opening bell, the S&P is down 1.7 percent, with the Dow and the Nasdaq over 2 percent lower.

Making life hard for American companies in China as retaliation in a trade war need not be formal and widely publicized. Our neighbors in Nebraska and South Dakota face similar economic pain. "It is patently political rhetoric created to show the great US agricultural breadbasket, most of which is Trump country, that Trump will defend its interests strongly against Chinese threats as USA politics enter the midterm elections season with Republican Congressional majorities at stake".

Before it's too late.

Trade wars, by contrast, are sure to cause economic harm in the short run - including higher prices to consumers, lost sales to farms and factories, and a drag on the USA economy.

President Moon Jae-in said growing trade protectionism and trade conflict between the United States and China could hurt the Korean economy and he urged the country to prepare. "If the United States announces an additional $US100 billion ($130 billion) list of tariffs, China has already fully prepared, and will not hesitate to immediately make, a fierce counterstrike".

That is doubly true in a potential trade war with China, for several reasons.

The U.S. tariffs target the high-end technology products made in China.

China retaliated by unveiling planned levies on $50 billion worth of major U.S. exports including soybeans, cars and small aircraft. The tariffs have not yet been implemented and the White House said it is open to negotiations with China, even though Beijing has been cool to talks. Beijing countered with equal levies on $50 billion of 128 USA goods, notably soybeans, corn, cotton, chemicals and cars.

Much could rest on what China offers the United States in terms of increased access for American businesses to sectors of the Chinese market now subjected to protections. "Perhaps there will be some fruitful negotiations", he said.

"We are exporting out pipes and tubes to the USA, but we are not dependent on America as we have got other markets, which we are been developing for the last few years".

Although the implementation of tariffs is still some time away, futures markets and the stock market have felt the effects.

Other reports by Insurance News

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