BOFIT Viikkokatsaus / BOFIT Weekly 2018/14

In late March, US president Donald Trump announced plans to impose a 25 % import tariff on certain Chinese goods if China refused to open its markets and continued to infringe on intellectual property rights. That threat materialised on Tuesday (April 3), when, as expected, the US issued a list of over 1,300 Chinese imports subject to the additional tariff. The value of affected goods imported from China to the US last year was roughly $50 billion dollars (about 10 % of the total US imports from China). The list includes a range of pharmaceuticals, hospital equipment, machinery, electronics and other goods. The Trump administration says that the tariffs are a targeted response to China's protectionist industrial policies.

China's response was swift. On Wednesday (April 4), China issued its own list of 106 American imports that would be subject to a 25 % additional tariff. Like the US, China's retaliatory measures targeted specific imports with an annual value of about $50 billion (32 % of China's imports from the US). The list includes soybeans, commercial aircraft and cars.

While the situation seems to be trending in a dangerous direction, there remains hope of a negotiated solution. The US tariff hikes and Chinese retaliatory measures would only enter into force in late May at the earliest after a mandatory hearing process. China has long given lip-service to reforms the US now seeks (and others hope for), thereby providing a basis for resolving the matter amicably. However, already on Thursday (April 5), president Trump responded with a further threat of additional tariffs targeted at another $100 billion in Chinese imports.