U.S. efforts aimed at balancing its trade deficit with China, could significantly impact its strategic “Made in China 2025” policy. A reduction in Beijing’s global trade surplus is likely to have wide ranging cascading effects on its economy and its military spending.
While confirming that the United States will begin collecting tariffs from Chinese goods worth $34 billion from Friday as of 12:01 a.m. Washington D.C. time (0401 GMT), U.S. President Donald Trump has made it clear that ultimately he may impose tariffs on Chinese goods worth $500 billion.
This is roughly the total amount of Chinese goods imported to the U.S. in 2017-2018.
“You have another 16 (billion dollars) in two weeks, and then, as you know, we have $200 billion in abeyance and then after the $200 billion, we have $300 billion in abeyance. Ok? So we have 50 plus 200 plus almost 300,” said Trump to reporters aboard Air Force One.
Trump’s comments indicate the seriousness with which Washington intends to balance its trade deficit with China.
As per a notice put up by the U.S. Customs and Border Protection, it would begin collecting 25% duties on 818 product lines identified in June by the U.S. Trade Representative’s Office.
Although China has vowed to retaliate immediately with tariffs of its own, but given its trade surplus with the U.S., its stakes are much higher since it has more to lose.
The trade war between the United States and China has sent shock waves through the world’s financial markets, including currencies and stocks.
On Thursday, U.S. stocks however edged higher on the wings of hope that perhaps U.S. trade tensions with Europe could ease following German Chancellor Angela Merkel statement that she would back a reduction of European car tariffs if Washington abandons its threatened higher car levies.
Adding to these trade tensions was a Chinese court’s pronouncement that temporarily barred Micron Technology Inc from selling its main semiconductor products in the country citing violation of patents held by Taiwan’s United Microelectronics Corp (UMC).
This gains significance since the semiconductor sector has gained prominence since it is a key priority under Beijing’s “Made in China 2025” policy.