The possibility of increased tariffs on China hangs in the balance as a 90-day respite is set to conclude on Tuesday. Post the most recent consultations between the U.S. and China, conducted in the previous month, the officials from both sides anticipated an extension of the hiatus by an additional 90 days. The U.S., however, has put the onus of the final decision on President Donald Trump, whose announcement is still pending. As the prospect of heightening tariffs lingers, companies are stuck in uncertainty, which potentially poses a threat to global market stability.
President Trump has a track-record of periodic modifications of both deadlines and tariff percentages and there hasn’t been any signal from either party regarding the course of action for the upcoming Tuesday. Postponing the deadline for clinching a trade agreement with China could preclude the prematurely unveiled threats of imposing tariffs as high as 245%. These heightened tariffs are devised to balance the vast and persistent U.S. trade deficit against China that spiraled to a 21-year low recently in July, as impending tariffs began to dent Chinese exports.
Although the U.S. occasionally provides updates on the status of ongoing discussions, China is historically quiet until major decisions have been finalised. Reflecting this pattern, Beijing has been silent about the imminent deadline thus far. In recent discourse, U.S. Vice President JD Vance disclosed Trump’s contemplation of imposing further tariffs on China, premised on China’s involvement in the Russian oil trade. However, he clarified that the President remains undecided.
Introduction of exorbitant tariffs on Chinese exports destined for the U.S. could intensify pressure on Beijing, especially at a time when China’s economy, being the second largest globally, is in a recovery phase following a drawn-out slump in its real estate market. The persistent aftermath of the COVID-19 pandemic has left a considerable population dependent on temporary jobs, thereby constricting employment opportunities. Intensifying this crisis, increased import levies on small packages coming from China have adversely affected smaller manufacturing units leading to ramped-up layoffs.
However, despite these economic challenges, the fact remains that the U.S. relies on Chinese imports across a broad range of goods. This includes everything from everyday household items and apparel to more specialized items such as wind turbines, basic computer chips, electric vehicle batteries, and the rare earth materials necessary for their production. This dependence does endow Beijing with substantial negotiating power in discussions with Washington.
Regardless of augmented tariffs, China maintains competitiveness across numerous products. Chinese leadership is aware that the cumulative economic impact of raised tariff-induced price hikes is only starting to ripple through the U.S. economy. As it stands, importation from China incurs a 10% foundational tariff along with an additional 20% tariff related to fentanyl concerns. Certain goods attract even higher tax rates.
Meanwhile, American exports destined for China are charged around 30% in tariffs. An escalated tariff war was put on hold when, previously, Trump threatened to impose 245% import duties on Chinese goods, a move to which China retaliated by announcing a potential increase in tariff on U.S. goods up to 125%.
A potential trade conflict between the two economic superpowers could have far-reaching impacts on the global economy, influencing aspects like industrial supply chains, the demand graph for key commodities like oil and copper, and also could have serious geopolitical ramifications, such as exacerbating the conflict in Ukraine.
Trump has, following a conversation with Chinese leader Xi Jinping, conveyed his aspiration to arrange a meeting later this year. This suggests a motivation to establish a negotiated settlement with Beijing.
However, should the current peace not be upheld, trade disputes could intensify, leading to potentially higher tariffs, causing further economic stress for both nations and creating turbulence in global markets. This uncertainty could create hesitancy in businesses when making investment decisions or hiring, potentially leading to higher inflation.
The post Tariff Increases on China: The Clock Ticks Down to Decision Day appeared first on Real News Now.
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