The Shanghai Stock Exchange crashed after Trump announced that tariffs will be implemented on Friday, the stock market plummeted by 5.5 percent and stock market fell by 3 percent. The stock market across Asia, Europe and North America fell after Trump’s announcement. However, China was most affected by Trump’s announcement.
“For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods,” said Trump. The 10 percent tariff on 200 billion dollars’ worth of Chinese imports was imposed on 24th of September last year. Trump threatened to increase the tariff to 25 percent by the end of the year if a trade deal is not struck. Four months in the ongoing year have passed but no deal has been struck and therefore Trump has decided to keep the promise. “The 10% will go up to 25% on Friday,” said Trump.
The impact of trade tariffs on Chinese exports has been very visible in the last few months. Encouraged by the Chinese losses, Donald Trump has announced that US will increase the tariffs on 200 billion dollars of Chinese goods to 25 percent from the existing 10 percent. The talks and negotiation to end the trade war are going on between China and United States and a Chinese delegation is expected to reach Washington on Wednesday. However, Trump is not pleased by the progress on trade talks and this was the reason behind increase in tariffs.
US administration threatened to impose further tariff on imports worth 325 billion dollars with 25 percent tariffs if China retaliated to these tariffs. As of now, China and United States both have imposed tariffs on trade worth 360 billion dollars, with US imposing it on 250 billion dollars of Chinese goods and the dragon imposing it on 110 billion dollars of American goods.
The US has a trade deficit of almost 700 billion dollars of which China accounts for almost half. Imposing import tariffs is rebalancing the trade relations of US with countries like China, Japan, Germany, Mexico etc. Trump is vehemently opposed to the current trade relations between America and China because they are heavily skewed in favor of China. In 2016, China was the largest goods trading partner with 578.2 billion dollars in total (two way) goods trade during 2016. Goods exports totaled 115.6 billion dollars; goods imports totaled 462.6 billion dollars. The U.S. goods trade deficit with China was 347.0 billion dollars in 2016. Trump was opposed to the fact that the Asian economy deliberately keeps the value of its currency low, therefore, making its exports more competitive in the international market. The American manufacturers were losing to Chinese because the labor was cheap there, and goods produced in America have become uncompetitive.
China has very little room left to increase the tariffs as the total American exports to the dragon is only 130 billion dollars and it has imposed tariff on 110 billion dollars. When US imposed tariff of 25 percent on imports worth 50 billion dollars, China reciprocated with same tariff on same amount of trade. Later, when enraged US imposed tariff of 10 percent on 200 billion dollars then China imposed tariff of 5 to 10 percent on import worth 60 billion dollars. But now China could not impose further tariff as very little amount is left while US could impose tariff on imports of another 267 billion dollars.