Trump Fires the First Shot in the U.S.-China Trade War

A penalty levied by the U.S. government in the form of a 25% tax on $34 billion worth of Chinese goods came into effect on 12:01 AM EST on July 6, 2018. The 25% ad valorem duty rate is in addition to any pre-existing duty already imposed on the list of goods.

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According to the U.S. government, the action was taken as trade remedies in accordance to Section 301(b) of the U.S. Trade Act of 1974. Section 301 authorizes the U.S. President to take all appropriate action against any act, policy, or practice of a foreign government that is unreasonable and that burdens or restricts U.S. commerce.

This is likely on the start of the long and unyielding U.S.-China trade war. On June 15, Ministry of Finance of the People’s Republic of China also published a second list of retaliatory tariffs “to be implemented at an undetermined later date” – likely the same date that the U.S. implements its own second phase of tariffs.

The act, policy, or practice in this case is related to technology transfer, intellectual property, and innovation.

The initial investigation by the Office of the United States Trade Representative (USTR) on Chinese government started on August 18, 2017. On March 22 of this year, USTR issued a notice stating that the investigation found the acts, policies, and practices by the Chinese government to be actionable.

On June 15, U.S. made a tariff announcement on a final list of Chinese goods. In retaliation, China’s Ministry of Finance released a list of U.S. exports also worth $34 billion that mainly consists of agricultural and aquatic products as well as cars.

China has consistently taken a hardline stance on the matter. As China’s Ministry of Commerce (MOFCOM) stated last month, China will “impose tariffs with the same size and force and all the trade and economic achievements reached by the two sides will be invalid at the same time”.

The amount of U.S. exports that will be subject to retaliatory tariffs from Chinese, Mexican, Canadian and other governments will reach $75 billion by the end of this week, according to a new analysis by the U.S. Chamber of Commerce.

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