Tariff War Ratchets Up

Sep 21, 2018  | 3 min  | Ep4405

Late Thursday, Canada’s Foreign Affairs Minister returned home after NAFTA trade talks failed to deliver a breakthrough.

As the U.S. and its northern neighbor struggle to agree on dairy market access plus a dispute settlement mechanism, another major trading partner is responding to action taken by the White House.

Peter Tubbs reports. Producer contact peter.tubbs@iptv.org

The United States and China each took another step down the Tariff Trail as the world’s two leading economies added new tariffs to an already long list of taxed imports.
The Trump Administration added a 10 percent tariff on another $200 billion worth of Chinese goods, which is scheduled to increase to 25 percent in January 2019. 
China retaliated Tuesday with duty increases on $60 billion worth of imports from the United States. Both countries already have tariffs on $50 billion worth of selected imports from each country. 
The Trump Administration has threatened to add tariffs to an additional $267 billion of imports from China, which would cover virtually all of the $517 billion the United States imports from the Asian economic behemoth.
The value of the Chinese yuan has dropped in relation to the U.S. dollar since January when the one-for-one exchange of tariffs began. The cheaper yuan also has helped China withstand the added costs of American tariffs.

Chad Hart is an Associate Professor of Ag Economics at Iowa State University. Professor Hart has noticed a change in the Chinese response to new tariffs.
Chad Hart, Iowa State University: “Now that we’ve reached this level that we are talking about $200 billion dollars on our end, well that swamps actually what we ship them in total. And so they switched from dollar to dollar proportional to percentage wise. So they looked at that $200 billion dollar amount and said, OK, that’s forty percent of what we ship you, we’re going to hit 40 percent of what you ship us, and so that worked out to about $60 billion.”

Hart believes the tariffs placed on imports from China to the United States are going to become more noticeable to the American consumer.
Chad Hart, Iowa State University: “The tariffs up to this point have been in those process goods, so the consumer doesn’t feel them directly. Now we’re getting to the level where you’re talking about taxing 40-50 percent of all the trade, yeah, you have to get into those consumer goods, where the price transmission becomes much more transparent. We’re watching companies like Wal-Mart try to figure out, OK, do we pass this additional cost off on our consumers, do we try to absorb that somehow, or some combination in between?”

He expects lost farm income is expected to the slow growth the growth of local economies, as farmers curb their spending.
Chad Hart, Iowa State University: “We’re probably looking at a 1-2 percent decline in the state GDP because of this tariff disruption.”

For Market to Market, I’m Peter Tubbs.




Grinnell Mutual Insurance