Tit for tat

On July 6, the US imposed a 25% tariff on 34 billion USD worth of Chinese goods. Immediately, China took retaliatory actions. The tariffs are on the “backbone” products of the two countries.

The US plans to impose additional tariffs on 16 billion USD worth of Chinese imports in the next two weeks. President Donald Trump warned that Washington is ready to impose tariffs of 10% on additional 200-300 billion USD worth of Chinese goods bringing the total to 550 billion USD. The Chinese Ministry of Trade criticized what it called "trade bullying" and said it had filed a law suit against the US at the World Trade Organization. China called the US action “unwise” and said it could harm the interests of the US and other countries.

Trump’s imposition of tariffs was not surprising. During his campaign, he repeated his intention to protect the US intellectual property and technology and reduce the US’s trade deficit with China.

A game without winner

Analysts said a tit-for-tat trade war between the two superpowers could trigger another global economic crisis.

The tariffs could slow growth in the US and China 0.1 to 0.2% this year. That doesn’t sound like much, but for such big economies the damage will be considerable. Increased business risks, erosion of trust in the private sector, and a disruption of value chains will amplify the economic shock. Many Chinese export companies will be hurt, as will American companies in China.

Mr. Trump will be hammered by strong criticism from the Democrats as well as from Republican business owners hurt by the trade war.