President Donald Trump announced in a Thursday Truth Social post that China will be hit with an additional 10% tariff next Tuesday, following an initial 10% tariff that went into effect earlier this month. What does that mean for Americans?
According to CNN, “U.S. stocks initially reacted negatively Thursday to Trump’s comments, with futures on the Dow falling 90 points,” while the “three major indexes opened higher but were volatile.”
China responded to the initial 10% tariff by levying a 15% tax on American exports to China, as well as a 10% tariff on crude oil, machinery, large-displacement cars and pickup trucks CNN noted. It said that the new round of tariffs could bring more retaliatory tariffs.
In a Feb. 1 fact sheet, the White House said that the Chinese tariff was aimed at cutting down the smuggling of fentanyl into the U.S. Furthermore, it said the tariff was a response to “China’s intellectual property theft, forced technology transfer, and other unreasonable behavior.”
In his Thursday post, Trump said: “Drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels. A large percentage of these Drugs, much of them in the form of Fentanyl, are made in, and supplied by, China.” Tariffs on Canada and Mexico, are also expected to begin March 4. China, Canada and Mexico are the nation’s biggest trading partners.
This week, Rodney Holcomb, agriculture economics professor at Oklahoma State University, discussed the potential impact of the tariffs on our neighbors with Audacy.
“So, like a retail grocery store, they work on a very thin margin. They’re not going to give up that margin because their input prices went up,” he said. “They’ll just adjust the prices so that they maintain their margin and keep on going, so it will have an impact on the final consumer.”
Per the Economic Policy Institute, tariffs can be utilized to protect domestic production and other goals. The EPI said tariffs are “most effective when they focus on well-defined and narrowly tailored goals, they work best as part of a larger strategy.”
Holcomb also said that tariffs are almost always a negotiating tool, likening it to a “staring contest.”
One downside of tariffs is the potential for loopholes that reduce their effectiveness. For example, Voice of America reported this week that companies from China have been engaging in “transshipment,” or the transfer of goods to a second country. There, “Made in China” labels are switched for others.
During Trump’s first term, tariffs placed on China resulted in “big manufacturers like Boeing,” losing some access to international markets, according to the Economic Policy Institute. While China accounted for 25% of that company’s sales before 2018, China stopped ordering its aircraft after the tariffs. This “created an opening for China’s homegrown COMAC C919 – a direct competitor to Boeing’s 737 series planes.”
Bloomberg’s Mark Gurman joined Audacy this week to dive into one U.S. company’s attempt to avoid economic fallout from the Chinese tariff. Apple said it plans to invest $500 billion and add 20,000 new workers over the next four years in an apparent effort to get tariff reprieve from Trump.
“Trump wants to be able to go back to his base – he wants to go back to the country – and say that he’s bringing jobs back to America. He’s bringing more manufacturing back to America. Tim Cook, the CEO of Apple, wants to go back to his company and say that: ‘We’re avoiding tariffs... on the iPhone,’” that could potentially raise prices and slim margins, Gurman said.
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He added: “The truth is a little bit more nuanced.”
Gurman explained that Apple isn’t offering much that they wouldn’t already be doing. He said the company won’t be moving manufacturing of any of their products from China or Asia to the U.S. What they are planning to do is to work with Taiwanese company Foxconn to manufacture server infrastructure for artificial intelligence at its new facility opening in Houston, Texas. Chips that will be in the servers will still be made in Taiwan, Gurman noted.
Back during Trump’s first term, Apple lobbied the president in 2019 to secure exemptions for iPhone imports from China and pledged to repatriate some Mac computer manufacturing from China to the U.S. However, the company “never delivered on this promise,” according to the Economic Policy Institute.
Regarding the impending extra tariffs on China, Liu Pengyu, spokesperson for the Chinese Embassy, said that his country is working with the U.S. to address fentanyl concerns. However, he also criticized tariffs, the BBC reported.
“Reducing domestic drug demand and strengthening law enforcement cooperation are the fundamental solutions,” Pengyu said in a statement cited by the outlet. It warned that Trump’s tariff moves were “bound to affect and undermine future counternarcotics cooperation between the two sides.”
Still, the tariff moves from may not be over yet. The BBC noted that Trump had threatened tariffs as high as 60% on China while on the campaign trail last year.
Although U.S. voters are wary of tariffs on Canada and Mexico, they are more supportive of tariffs on China, according to results from a survey conducted by the British firm Public First and shared exclusively with POLITICO. Just 30% were opposed to the tariffs on China, while 45% supported them.
In May, another reciprocal tariff plan is expected to kick in, which might also impact American businesses and consumers.
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