The tariff dispute between the U.S. and China continues to escalate, with the two countries announcing they will impose 25% tariffs on $34 billion of the other's imports effective July 6, and threatening levies on another $16 billion of products. Depending on how the situation plays out, the U.S. would take a bigger hit, given that $50 billion ($34 billion plus the additional $16 billion) represents about 38% of U.S. exports to China, while the same dollar amount represents only 10% of Chinese exports to the U.S. While the tariffs are unlikely to materially threaten either of the world's two biggest economies or overall corporate credit health within them, the imposition of tariffs heightens the risk of an all-out trade war. A breakdown in negotiations or policy misstepscould lead to a full-blown dispute that could damage global business and consumer confidence, investment prospects, and growth.
On June 15, President Trump approved tariffs on 1,102 Chinese products worth approximately $50 billion. The move originally targeted 1,333 products, but the list was trimmed after a public comment period. The tariffs are generally aimed at industrial sectors that coincide with China's "Made in China 2025" industrial policy, which lays out a strategy for the country to dominate high-tech industries (e.g. aerospace, automobiles, industrial machinery, information technology, and robotics) excluding consumer goods such as cell phones or televisions.
The U.S. tariffs will be implemented in two rounds on two product lists. The first contains 818 products (a subset of the original list announced in April) worth about $34 billion, and the U.S. government will begin collecting additional levies on them on July 6. The second list proposes new levies on 284 products identified by the Section 301 Committee as benefiting from China's industrial policies. This list covers approximately $16 billion of imports and will undergo further review in a public notice and comment process.
In response, China announced that it will impose an initial set of levies on 545 American products, also beginning July 6, including farm goods, automobiles, and seafood products. China also plans to impose levies on an additional 114 American goods at a later date, including chemicals, medical devices, and energy products. China's response to implement and subsequently consider additional tariffs could ultimately escalate the situation further, as President Trump has threatened levies on an additional $100 billion of Chinese products if China "retaliates."