Another round of tariffs have been announced, both the US and the Chinese tariffs will be effective September 24th. Here are the details…
Editor’s Note: We are reporting two news articles in one posting. First, the latest round of tariffs announced by the US, and secondly, the Chinese response with new tariffs of its own.
From Zero Hedge
With traders waiting with bated breath for hours, moments ago the White House announced that it has imposed tariffs on approximately $200 billion worth of imports from China, effective September 24.
The tariffs will start at 10% until the end of the year, but in an unexpected twist, are set to rise to 25% on January 1, 2019, in what is worse case scenario than what the market had been pricing in, namely a 10% rate indefinitely.
Trump also warns that if China takes any retaliatory action “against US farmers or other industries”, the US will immediately pursue “phase three”, and impose an additional $267 billion in tariffs on Chinese imports.
The statement notes that while the US has given China “every opportunity to treat us more fairly”, so far China “has been unwilling to change its practices.”
Trump concludes by saying that it is his duty “to protect the interests of working men and women, farmers, ranchers, businesses, and our country itself. My Administration will not remain idle when those interests are under attack. China has had many opportunities to fully address our concerns. Once again, I urge China’s leaders to take swift action to end their country’s unfair trade practices.”
Separately, the USTR announced that it has removed about 300 product categories from the tariff list and has cut some subsets of products, but the total value remains “approximately $200 billion”, and – as we showed earlier – a substantial portion of the imports targeted this time are consumer goods, which means that the pain to the US household bottom line is about to get real.
Meanwhile, these are the states that will be most impacted by the new tariffs (chart via Bloomberg):
Full statement below:
Today, following seven weeks of public notice, hearings, and extensive opportunities for comment, I directed the United States Trade Representative (USTR) to proceed with placing additional tariffs on roughly $200 billion of imports from China. The tariffs will take effect on September 24, 2018 and be set at a level of 10 percent until the end of the year. On January 1 the tariffs will rise to 25 percent. Further, if China takes retaliatory action against our fanners or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.
We are taking this action today as a result of the Section 301 process that the USTR has been leading for more than 12 months. After a thorough study, the USTR concluded that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property — such as forcing United States companies to transfer technology to Chinese counterparts. These practices plainly constitute a grave threat to the long-term health and prosperity of the United States economy.
For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies. We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices. To counter China’s unfair practices, on June 15, I announced that the United States would impose tariffs of 25 percent on $50 billion worth of Chinese imports. China, however, still refuses to change its practices — and indeed recently imposed new tariffs in an effort to hurt the United States economy.
As President, it is my duty to protect the interests of working men and women, farmers, ranchers, businesses, and our country itself. My Administration will not remain idle when those interests are under attack. China has had many opportunities to fully address our concerns. Once again, I urge China’s leaders to take swift action to end their country’s unfair trade practices. Hopefully, this trade situation will be resolved, in the end, by myself and President Xi of China, for whom I have great respect and affection.
Continuing from Zero Hedge
Just as Donald Trump was further threats aimed at Beijing after he launched another $200BN in tariffs targeting Chinese imports, and warning that “there will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!”, China’s Ministry of Finance issued a statement disclosing that it would retaliate by levying tariffs on another $60BN in US goods (effectively covering all US imports with tariffs), which would take effect from Sept. 24 at 12:01 p.m.
While the retaliation was expected, in what appears to be an olive branch to Trump, Beijing said that it would impose a 10% tariff rate on goods that it previously listed at a 25% rate, and a 5% rate for goods that previously were seen as being in the 10% rate bucket.
Here are the highlights, from Reuters and Bloomberg:
- CHINA SAYS NEW TARIFFS ON U.S. GOODS EFFECTIVE AT 1201 LOCAL HOURS ON SEPT 24
- CHINA TO LEVY TARIFFS ON $60B U.S. GOODS
- CHINA SAYS TO LEVY TARIFF RATES RANGING BETWEEN 5 TO 10 PERCENT ON U.S. GOODS
- CHINA SAYS NEW TARIFFS WILL BE LEVIED ON 5,207 U.S. PRODUCTS, UNCHANGED FROM INITIAL PROPOSAL
China also said that if the US insists on raising tariffs rates on Chinese goods (from 10% to 25% or more), China would respond accordingly, but noted that it hopes to stop trade frictions and hold a constructive dialogue.
The full statement, google translated:
According to the “Notice of the Customs Tariff Commission of the State Council on Adding Tariffs to Certain Imported Goods Originating in the United States (Second Batch)” (Announcement of the Taxation Committee  No. 6), the relevant implementation matters are hereby announced as follows:
1. For the goods of the Taxation Commission  No. 6 attached to the list of tariffed goods of the United States and Canada, the customs duty shall be imposed from 12:01 on September 24, 2018, and 2,493 tax items listed in Annex 1 shall be The 1078 tariff items listed in Annex 2 are subject to a 10% tariff, and 5% of the 974 tax items listed in Annex 3 and 662 items of tax items listed in Annex 4 are subject to a 5% tariff.
2. Other matters shall be implemented in accordance with the Notice of the Taxation Committee  No. 6.
The Chinese State Council also issued the following announcement justifying the new tariffs (google translated):
On July 11, 2018, the US government announced a 10% tariff on goods imported from China of about 200 billion US dollars. On August 2, the tax rate was increased to 25%. On September 18, 2018, the US government announced the implementation of measures to impose tariffs on imports of approximately US$200 billion from China. Since September 24, 2018, the tariff rate has been increased by 10%, from January 1, 2019. The tariff rate has been increased to 25%. The US has been willing to go its own way, leading to escalating trade friction between China and the United States. In order to defend free trade and the multilateral system and defend its legitimate rights and interests, China has to impose tariff measures on the announced list of about 60 billion US dollars of goods.
According to the “People’s Republic of China Foreign Trade Law”, “People’s Republic of China Import and Export Tariff Regulations” and other laws and regulations and the basic principles of international law, the State Council’s Customs Tariff Commission decided to produce 5,207 tax items and about 60 billion US dollars of goods originating in the United States. , 10% or 5% tariff is imposed, starting from 12:01 on September 24, 2018. If the US insists on further increasing the tariff rate, the Chinese side will respond accordingly and the relevant matters will be announced separately.
The Chinese side reiterated that the purpose of implementing the above-mentioned tariff increase measures is to curb the escalation of trade frictions. It is a forced response to US unilateralism and trade protectionism. China hopes that the US side will stop trade frictions. China and the United States will adopt equality, integrity and pragmatism. Dialogue, mutual respect, and jointly safeguard the overall interests of bilateral economic and trade relations of mutual benefit and win-win, jointly safeguard the principle of free trade and the multilateral trading system, and jointly promote the prosperity and development of the world economy.
The dollar tumbled on the news…
… while US equity futures dropped, fading most of this morning’s gains.