The impending expiration of a 90-day reprieve on increased tariffs between the U.S. and China is looming, leaving the progression of the situation uncertain. In late discussions held between the two world powers, officials had initially anticipated a second 90-day postponement of the impending tariff hikes. However, the final decision rests upon the discretion of U.S. President Donald Trump, who is yet to formally announce his decision.
This period of unpredictability has placed businesses into a precarious situation, with the potential sudden decision to implement higher import taxes possibly shaking the foundations of global financial markets. The President has displayed a pattern of repositioning deadlines and tariff rates, leading to heightened uncertainty. As we approach Tuesday’s deadline, the plans of both sides remain unclear.
The U.S.’s suggestions to extend the deadline is seen as a way to deter previous threats of raising tariffs by up to a staggering 245%. Enacting higher tariffs serves the purpose of combating the considerable and persistent U.S. trade deficit with China, which reached a 21-year low back in July due to threats of increased tariffs impacting Chinese imports.
While the U.S. is known to provide glimpses into the status of these discussions, it is out of character for China to comment until conclusive decisions are made. So far, the Chinese government has maintained its silence on the subject in the run-up to Tuesday’s deadline.
In a recent interview, U.S Vice President JD Vance disclosed that President Trump was contemplating the imposition of further tariffs on China due to its crude oil imports from Russia. Although this potential additional financial burden is being explored, it remains categorically stated that as it stands, President Trump has not made any definitive decisions.
The enforcement of excessively high tariffs on Chinese exports to the U.S. would undeniably put high stress on Beijing, particularly at a time when China, being the world’s second biggest economy, is still recovering from a prolonged lull in its real estate market. The residual impacts of the global COVID-19 pandemic have left vast amounts of individuals dependent on less stable ‘gig work’, further stifling the job market.
Increased import taxes enforced on smaller packages from China have also impacted smaller production facilities. Higher tariffs have lead to an increase in layoffs within these smaller factories. However, with the U.S.’s extensive reliance on imports from China for a wide spectrum of products ranging from everyday items to more specialized goods such as wind turbines, basic computer chips, batteries for electric vehicles and the scarce elements required to produce them, it provides China with a substantial negotiating pro in this ongoing dialogue with Washington.
Despite potential tariff hikes, China continues to maintain a competitive edge for many products. The leaders of the country are cognizant of the fact that the impact of higher prices due to tariff increases is starting to hit the U.S. economy. Currently, imported goods from China face a baseline tariff of 10% and an extra 20% tariff related to the fentanyl problem, although some items face higher tariffs.
Simultaneously, U.S. exports to China are subjected to tariffs reaching around 30%. Previously, before an interim agreement was reached, President Trump threatened to impose a monumental 245% import duty on goods coming from China. In a tit-for-tat response, China indicated it might raise tariffs on U.S. goods to 125%.
A full-flown trading battle between the first and second largest global economies would certainly ripple across worldwide economies. This would impact everything from industrial supply chains and commodity demand (such as copper and oil), to more complex geopolitical situations, for instance, the ongoing war in Ukraine.
Following a recent phone call with the Chinese leader Xi Jinping, President Trump expressed his desire for a face-to-face meeting later on in the year. This serves as an additional motivation for reaching a mutually beneficial agreement and avoiding the potentially disastrous implications of a trade war.
Should the ongoing truce fail and discussions fall through, trade disputes may spiral out of control, leading to even further tariff increases that would negatively impact both economies, as well as create turbulence in financial markets worldwide. The business sector would inevitably be forced into a defensive stance, holding off on investments and potential hires as inflation precariously teeters on the brink of a breakthrough.
The post Uncertainty Looms as US-China Tariff Deadline Nears appeared first on Real News Now.
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