Trump's China tariffs seen delivering on effort to curb targeted imports

Trump's China tariffs seen delivering on effort to curb targeted imports

US President Donald Trump said in his State of the Union address today that any new trade deal with China "must include real, structural change to end unfair trade practices, reduce our chronic trade deficit and protect American jobs".

Unless the U.S. and Chinese agree to drop their tariff dispute by 1 March, duty on each country's products will rise to 25 per cent, up from the current 10 per cent level.

The US president has vowed to increase US tariffs on US$200 billion (RM815.6 billion) worth of Chinese imports to 25 per cent from 10 per cent now if the two sides can not reach a deal by 12:01 am (0501 GMT) on March 2.

The president also renewed his often-repeated falsehood that China was paying the U.S. import duties on its exports.

"The implications are going to be massive", Pamela Coke-Hamilton, UNCTAD's head of global trade, said at a news conference in Geneva on Monday.

The world's two largest economies have 24 days left in a three-month truce in their trade war before United States duty rates are due to rise sharply - an escalation that economists say could be a powerful negative shock to the global economy.

Smaller and poorer countries would struggle to cope with the external shocks, she said.

"We are now making it clear to China that after years of targeting our industries and stealing our intellectual property, the theft of American jobs and wealth has come to an end", Mr Trump said.

"Our analysis shows that while bilateral tariffs are not very effective in protecting domestic firms, they are very valid instruments to limit trade from the targeted country", Ms. Coke-Hamilton said.

"I don't blame China for taking advantage of us".

The US tariffs are aimed at providing protection to US firms from Chinese competitors who can often produce goods more cheaply. It warned that "more countries may join the fray" by imposing their own tariffs and that "trade tensions could spiral into currency wars".

Next, Ms. Coke-Hamilton said, there would be "increased pressure on global growth, as companies will have to impose adjustment costs which will affect productivity investment and profitability".

The higher cost of US-China trade would prompt companies to shift away from current eastern Asian supply chains, but the impact of the tariffs would not primarily benefit US companies, according to the report. "Japan, Mexico and Canada will capture over $20bn each", it said.

Other countries would capture an estimated 82 percent of the value of the $250 billion of Chinese exports and 85 percent of $85 billion of US exports hit by the tariffs.

But the UNCTAD study also warns that the spat could hit East Asian producers the hardest, with a projected $160 billion contraction in the region's exports unless discussions between China and the U.S. are resolved before the March deadline.