Link to article: https://apnews.com/article/china-us-trump-tariffs-2e05057e973e1e26d1b95c5be003b4cd
Following the tariffs of “Liberation Day” on April 2, the U.S. and China have escalated economic tensions. Both countries have imposed high tariffs on the opposing country’s goods, and have expressed a staunch unwillingness to back down on these policies. Representatives of China’s government say their retaliatory tariffs are to protect China’s interests and, to an extent, to stand up to the U.S. and protect the global economy. The U.S. is currently imposing 145% tariffs on Chinese goods and China is currently imposing 125% tariffs on American goods. China’s Commerce Ministry plans to file a lawsuit against U.S. tariffs with the World Trade Organization.
The primary purpose of implementing protectionary tariffs on imports is to protect a country’s industry, incentivizing companies to move production back to their home country, creating more jobs for their citizens (and potentially raising more money for the government). The main drawback, however, is that consumers pay the price of the tariffs – if a person wants to buy a good from a tariffed country, the seller will have increased the price to account for the tax on imports, and consumers will have to pay that higher price. If companies move back to the country implementing the tariffs, however, prices will go back down. Not all companies will do this, though, and, even if they do stop outsourcing production, doing so will take time – allowing frustration at higher prices to fester among consumers.
Both countries have labeled their tariffs as retaliatory, however. The U.S. claims that their tariffs are in response to foreign countries ‘taking advantage’ of the U.S. and, in the case of China, a punishment for unfair trade practices and involvement in drug trafficking. But U.S. tariffs definitely began as protectionary – it just sounds better to frame them as retaliatory, in the same way it sounds better to frame yourself as being the defender and not the offender. Chinese tariffs are actually retaliatory as they are intended to use economic power to coerce the U.S. into lowering their tariffs.
The stakes in this trade war are high not just for China and the U.S., but for the global economy. The way this trade war ends up will shape how the world economy operates going forward. High tariffs from the U.S. may harm some countries’ economies, may incentivize others to seek new markets, may strengthen the U.S. – it’s impossible to say for certain. Certainly, though, these tariffs are affecting the international community’s perception of America.
These recent tariffs are a perfect example of the shortcomings of intergovernmental organizations. Both the U.S. and China are members of the World Trade Organization, but both have violated many of the organization’s norms. China is moving to sue the U.S. for their recent violations, but – even if they win – there is no meaningful way to force the U.S. to comply with the ruling. Therefore, China’s only real response is these retaliatory tariffs.