On Monday, Sept. 24, President Trump and President Xi Jinping unleashed the latest wave of tariffs. Trump raised the tariffs on imported Chinese goods another 200 billion dollars. To retaliate, China raised their tariffs another 60 billion dollars, which is almost the maximum that they can tax.
Across both nations local and state governments are preparing for the ripple effect of the new tariffs. According to Business Insider, the products that will see the biggest losses in profit margins and an increase in prices are computer parts, tires, many products requiring a motor (cars, vacuums), and furniture. Those products alone account for 41.84 billion dollars of new tariffs being added.
In a study done by Iowa State University reported on by the Des Moines Register, the study showed that local products from Iowa, such as corn, beans, pork, and ethanol producers, are going to be hit hard. Each division of producers is expected to lose anywhere from 105 to 911 billion dollars, with pork producers standing to lose the most.
Another part of the study done by Iowa State University stated, “Iowa growers are expected to get $550 million in the first round of direct aid. Altogether, U.S. farmers are expected to see $4.7 billion in assistance from the $12 billion federal package.” All in all Iowa is looking at a 2.2 billion dollar revenue loss after the most recent round of tariffs.
While this is a major problem, Trump’s tactics seem to be taking an effect on China as well. According to the New York Times China is trying to spend even more money after all of the tariffs to jumpstart local governments and construction projects. Lui He, a vice premier of president Xi Jinping, pledged in early 2018 that “Beijing would bring the country’s debt under control within three years. Beijing had clamped down on some bank lending to state-owned enterprises over the last few years, data from the Bank of International Settlements has shown.”
Originally China planned on reducing its 28 trillion dollars of debt through these means. However, consumer spending and investing has gone down due to the trade fear spurred on by the hesitation in China’s economic growth, causing the Chinese government to re-open the floodgates and allow practically unlimited credit loaning, according to the same New York Times article.
The 200 billion dollar tariff started at 10 percent taxes on imported Chinese goods, but by the end of the year it will rise to 25 percent. Trump also stated that, “if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.” While China has raised tariffs on almost all imported US goods, the final “phase three” would ensure that the US is taxing all imported goods from China.
Many companies have already raised concerns of how they will have to raise prices to maintain a steady rate of growth, the probability of losing workers, and that profit margins will dip significantly. For consumers, both foreign and domestic, it means one things: more debt leading to more taxes. While the politicians fight over trade gaps, agreements, fairness, and “trade bullyism”, the taxpayers will feel the aftermath of the trade war.
