White House remains on message for plan to impose a 25% tariff on $50 billion of goods from China

Any thoughts that a “trade war” between the United States and China was not a possibility were put to rest earlier today based on an announcement coming out of the White House.

In a wide-ranging statement, the White House said that under Section 301 of the Trade Act of 1974, “the United States will impose a 25% tariff on $50 billion of goods imported from China containing industrially significant technology, including those related to the ‘Made in China 2025’ program.”

It added that the final list of covered imports will be announced by June 15, with tariffs to be imposed on those imports soon after that date.

Along with the 25% tariff on $50 billion of goods imported from China, the White House said the United States remain focused on: protecting domestic property and intellectual property; stopping noneconomic transfers of industrially significant technology and intellectual property to China; and enhancing access to the Chinese market. 

What’s more, it said the U.S. will request that “China remove all of its many trade barriers, including non-monetary trade barriers, which make it both difficult and unfair to do business there,” as well as request that tariffs and taxes between the U.S. and China “be reciprocal in nature and value.” 

The statement also explained that the U.S. will continue to communicate with China regarding these issues, with a key objective to grow U.S. exports by doing away with what it called long-standing structural issues and “China’s severe import restrictions.

A New York Times report stated that Commerce Secretary Wilbur Ross will go to China on June 2 to continue the trade negotiations, following a round that was wrapped up on May 19 that had “little progress toward resolving a long list of complaints the American negotiators had previously identified.”

When President Trump first floated the possibility of the U.S. implementing tariffs of 25% for steel and 10% for aluminum imports in early March, many experts described it as setting the stage for an unwanted or unneeded initiative certain to spur on a global trade war, with the United States front and center in the middle of it all. 

And aside from whatever the ramifications of a true trade war would look like, there is, of course, the fall out, or trickle down, impact on what this could mean for consumer spending, which is viewed as the real lifeblood of economic activity, more so than any other economic driver.

The potential impact of tariffs on consumers was made clear by the National Retail Federation (NRF).

NRF President and CEO Matthew Shay said his organization is disappointed with the White House’s plans to move forward on tariffs on Chinese imports, which the NRF maintains will result in higher consumer costs, a reduction in jobs and Chinese retaliation.

“China’s trade practices raise serious concerns, but job-killing tariffs aren’t the answer,” said Shay. “As the U.S. and China prepare for another round of negotiations, we hope the administration has clearly defined objectives and concrete solutions to resolve this trade dispute without tariffs. The lack of clarity surrounding the administration’s plans is creating significant uncertainty for American businesses, disrupting supply chains and threatening to undermine the economic gains we’ve seen over the past year.”

In a recent interview, Ben Hackett, founder of maritime shipping consultancy Hackett Associates, said that the early March announcement by Trump, geared around the intent to impose tariffs on steel and other metals by the Trump at a time when the word economies are showing strong recovery seemed to be a “shoot yourself in the foot,” strategy.

And he also explained that implementing tariffs will result in retaliation from major U.S. trading partners. 

“How is that good for America? If the steep tariffs are put into place expect higher producer costs and lower exports,” said Hackett. “Again, neither good for the American economy nor the consumer. Nothing is certain anymore in Washington, D.C.”

Chris Rogers, research director for global trade intelligence firm Panjiva, said that today’s announcement does not introduce any new policy when viewed against what has been previously announced.

“The timing is likely tailored to remind China that the potential for tariffs is still out there ahead of Commerce Secretary Ross's visit in early June,” he said.

Despite the back and forth between the U.S. and China regarding tariffs and related protectionist measures, Rogers said that said things overall are in a pretty decent place, as it relates to global trade.

“Trade fundamentals remain solid,” explained Rogers. “In a world with no President Trump and President Xi shouting at each other, we are feeling pretty optimistic about things. Consumer confidence and business confidence are down a little bit, but still remain at high levels. Most products [categories] are seeing solid growth, but there remains an overhanging worry about tariffs finally arriving, with the ones for metals already intact. But once others kick in, there could be a sense of the wheels coming off the wagon.” 

And he also noted that there has recently been a step back in shipments from China that is not directly related to tariffs on shipments from China being implemented but rather to concerns that tariffs ‘might’ be implemented.

“One could argue that the mixture of nervousness, coupled with sensible supply chain strategies, could lead to less growth,” he said. “But things are a long ways from not growing as much as in the past, as opposed to [shipment levels] actually falling. It is possibly a sign of more to come, with signs of a summer slowdown, much like what has occurred over the past two years.”

Director, Economist and Chief Strategist for JLL’s U.S. Ports, Airports and Global Infrastructure Group, explained that the impetus for the U.S. to implement tariffs is to leave global markets open and also to compete on an equal basis with its trading partners.

“In the end, what we are really asking the world is to let our companies compete with yours on an equal basis,” he said. “When President Trump last went to China, he explained he cannot direct a U.S. company to produce a certain amount of a certain product, as the U.S. works on a free market basis. What the U.S. wants is for China to open its markets so that U.S. companies can compete. If those companies do poorly and cannot compete on an equal footing basis, so be it. We are a market-driven economy. In the end, the world is better off if it is market-driven, than if it is driven by a bunch of decisions made by politicians.”