Barring a last-minute cease-fire, Americans will wake up Friday in a full-blown trade war.
Despite the concerns of economists, the US Chamber of Commerce and even the Fed, the 12:01 a.m. launch of US tariffs on $34 billion of Chinese imports will already have been matched by Beijing-imposed tariffs on $34 billion of US exports to China.
Although neither side showed signs of blinking on Thursday, China’s Commerce Ministry was blunt in blaming the US for the trade war.
“To put it simply, the US is opening fire on the entire world, including itself,” Trade Ministry spokesperson Gao Feng said in a statement. “China will not bow down in the face of threats and blackmail and will not falter from its determination to defend free trade.”
Gao’s criticism resonated in key US quarters, with the Fed itself wary “about the possible adverse effects of tariffs and other proposed trade restrictions.”
The Fed’s concern extended to capital spending, which the central bank said has already “been scaled back or postponed as a result of uncertainty over trade policy,” according to the Thursday release of the June meeting minutes.
The US Chamber of Commerce also slammed President Trump’s tariff plan, calling it “nothing more than a tax increase on American consumers and businesses.”
The administration has played down the effect of retaliatory levies, noting that even with China’s countermeasures, less than half of 1 percent of US exports stand to be affected.
It also takes comfort in a tariff list designed to spare US consumers from additional duties on such Chinese goods as TVs and toys.
But, as the administration has learned from Harley-Davidson’s shifting some production overseas because of the trade spat with the European Union, trade-war consequences can be unpredictable.
In a study of the revised tariffs, which Trump announced on June 15, Syracuse University professor Mary Lovely found that they “would mostly miss Chinese companies and instead hit multinational corporations operating in China.”
US tariffs on Chinese computer and electronic products, for example, would affect only 13 percent of products made by domestic firms but would punish 87 percent of products made by non-Chinese multinational companies operating in China.