The trade war is entering phase two: USD 100 billion more US tariffs for Chinese imports

The trade war between US and China enters a new stage after President Donald Trump instructed his trade officials to identify tariffs on USD 100 billion more Chinese imports. The move comes after China’s decision to impose taxes on a list of products imported from US considered an “unfair retaliation”.

“We are on a dangerous downward spiral and American families will be on the losing end”, said National Retail Federation President and CEO Matthew Shay, cited by Reuters. Shay is only one of the voices to say that President Trump decision will create market volatility and economic uncertainty.

The war started after US proposed 25 percent tariffs on more than 1,300 Chinese products and China fires back with a list of proposed duties on USD 50 billion of American imports, from soybeans and cars to beef and chemicals. The farmers in the US are among those most hit by China’s decision so US Department of Agriculture is looking for ways to assist those farmers.

The two biggest categories of US imports from China in 2017 were products for communications and computer parts, with a total of USD 137 billion. Cellphones and computers were spared from the initial list, but they might be included on the second one. Footwear and clothes make a combined USD 39 billion of US imports.

The total trade gap between the two countries is USD 375 billion in China favor and Trump has demanded to cut the gap by USD 100 billion. According to a senior US official there a no formal negotiating sessions set, but US is willing to negotiate with China.

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The situation is a result of long time business model for American companies that moved the production in China, where cost are much smaller than in US, but in the long run the advantages are higher for Asian companies. Today, China is the biggest producer of goods, especially IT&C.