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China’s Retaliatory Tariffs On US Goods Become Effective

New tariffs by China of up to 25% have been levied on $60bn worth of American products. The tariffs became applicable from June 1 in Beijing and are retaliation for America doubling taxes on $200bn worth of Chinese products in May. Previously, tariffs between 5–10% had been imposed on 5,140 American goods. China, on Friday, announced that it would blacklist certain foreign individuals and firms it deemed could harm the nation’s interests. For fighting ‘trade protectionism and unilateralism’, Chinese Commerce Ministry had decided to make a list of ‘undesirable entities’. Gao Feng, a spokesperson of the ministry, said that any entity, individual or organization that posed any kind of threat to Chinese national security would be blacklisted.

Chinese tariffs on US goods are not going affect economic growth of America that much as it is able to tax only about $120bn worth of US products, the amount that was imported from America last year. Although, economists expect a maximum of one-tenth of America’s gross domestic product to be shaved off by tariffs imposed by Beijing, what could really affect America is lesser investment by China. US-China Business Council issued a warning, cautioning that American exports to China had reduced by about 7% the previous year due to the ongoing trade conflict between the two nations. Also, US–China Investment Project report found that investment by China into US had reduced by 60% last year due to worsening political climate.

By far, the largest producer of raw materials that are used in products ranging from renewable energy to electronics is China. These materials are vital for several US industries. If China curbs rare earth exports to America, the country would experience huge problems related to finding alternative sources of those materials as soon as possible. This move by China is similar to what Trump did in mid-May for protecting American computer networks from threats of ‘foreign adversaries’. Huawei faced the biggest blow, with the firm facing backlash from Western nations as well over possible threats posed by use of its products in 5G cellular networks. Although Huawei has been accused of spying on behalf of Chinese government, it has denied all such claims.

So far, $250bn worth of Chinese products has been taxed by US, with China facing allegations of unfair trade practices. Beijing reacted by levying duties on $110bn worth of US products.

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