United States – China: Effects of tariffs on their economies

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In March, the United States announced 25% tariffs on steel imports and 10% tariffs on aluminum imports from countries such as China.
In response, China retaliated in April with 15-25% import tariffs on 128 American products, from aluminum waste and scrap to pork, fruits and nuts, among others.
Following the implementation of his tariff, President Trump signed a memorandum on imposing additional import tariffs on 1,300 Chinese products, with a focus on high-tech items.

China responded by raising tariffs on a similar value of imports of American goods, including soybeans, airplanes and automobiles.

This article analyzes the impact of US and Chinese tariff actions on their economies and consumers, and explores the possibility of these actions escalating into an all-out trade war between the world's two largest economies.

Impact on economies and consumers
Recent US tariffs on Chinese imports focus on B2B products, and the list appears to have been chosen with concerns about reducing the impact on consumers that could affect the results of the upcoming congressional elections.

However, tariffs would raise prices for Ecuador Mobile Number List consumers indirectly, because companies pass on higher production costs to final prices.

From the Chinese side, the new tariffs on US imports affect a diverse set of industries such as soybeans, vehicles, chemicals and aircraft.

In response to the Chinese tariffs, US President Trump threatened that he could also raise tariffs by another $100 billion on Chinese imports.

Current tariffs stand at $12.5 billion, representing less than 0.1% of Chinese or American GDP. The specific tariffs announced so far have a fairly small macro impact on both China and the US, on the order of 0-0.2 percentage points below GDP levels.

Unofficial sources suggest that the United States and China began trade talks shortly after the April announcement. However, the talks apparently collapsed after the United States insisted that China must significantly reduce its support for domestic high-tech industries.

This came after Chinese negotiators offered to take steps to reduce the trade deficit by $50 billion by encouraging more American imports, as well as a speech by Chinese President Xi promising to reduce import tariffs on cars. and other products.


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Impact on B2B industries
According to the list of products provided by the US administration, the new trade tariffs are mainly aimed at accumulators and electrical equipment, machinery, rubber products, basic chemicals, electronic products, metals, motors and generators, transportation equipment and pharmaceutical industries. Additionally, some smaller industries are included, such as measuring and testing devices, weapons or industrial control equipment.

The impact of new tariffs on product prices may vary across different industries. The greatest impact is likely to be felt on accumulators, batteries and electrical equipment, as well as industrial machinery products.

The US imports more than a third of the above-mentioned products, with a significant portion of the imports coming from China. Therefore, the new tariffs would inflate product prices and have an impact on purchasing industries. In particular, the motor vehicle, construction, aerospace, machinery and energy industries would feel the most negative impact.

The new tariffs are likely to have a moderate impact on rubber products such as tires or conveyor belts, measuring appliances, basic chemicals and electronic components.

Additional tariffs on Chinese-made components would increase prices for buyers, however the effect would be softened by a well-diversified import structure.

Thanks to that, American manufacturers could replace Chinese imports with production from other countries. However, this will still put pressure on component prices and encourage manufacturers to reevaluate their supply chains.
               


In particular, tariffs on rubber products, electronic components, basic chemicals and measuring devices would affect the motor vehicle, chemicals and electronics industries.

Finally, new tariffs on metals, weapons, transportation equipment and pharmaceuticals are likely to have minimal effect. The Chinese products mentioned above represent a relatively small part of the overall import structure and American manufacturers could replace Chinese products with imports from other countries.

However, the new tariffs could still cause some disruption in the motor vehicle, aerospace or construction sectors. Despite the expected minimal effect on input prices, manufacturers may still need to reevaluate their supply structure. In addition, tariffs on some specific products or components where inherent costs are high could inflate input prices for consumers of metals, weapons, transportation equipment, or pharmaceuticals.