US tariffs on Chinese goods signal trade war has arrived
Today, the United States government followed through on earlier threats from US President Donald Trump by imposing a 25% tariff on about $50 billion worth of Chinese imports containing “industrially significant technologies,” which the Office of the United States Trade Representative (USTR) said are related to China’s “theft of our intellectual property.”
For its part, China’s Ministry of Commerce has answered US tariffs with the accusation that the US is responsible for “provoking a trade war,” and has promised to “immediately introduce taxation measures of the same scale and the same strength.”
The question of whether the United States government would follow through on threats to impose tariffs on trade partners has been a subject of concern in the air cargo industry since shortly after the election of President Trump in 2016. Industry leaders and associations have repeatedly warned that the healthy state of the industry in 2017 and beyond owes a great deal to borders that “are open to people and to trade,” in the words of IATA’s director general and CEO, Alexandre de Juniac.
De Juniac has also stressed that the risk of a full-blown trade war is one of the largest potential headwinds to growing air cargo demand. Global economic growth has been a driving force behind air freight’s success this year, and a trade war will certainly hamper that. According to MarketWatch, financial markets have already reacted to the tariffs as the start of “an official trade war with China,” with the Dow Jones Industrial Average falling 200 points, and industrial metals like copper – traditionally the most sensitive to trade disputes – declining by more than 2% for July delivery, in the sharpest fall since January.
Beyond the expected impact on trade flows with the imposition of additional tariffs, the US aerospace industry itself is a likely target of retaliation. As Cargo Facts senior director Alan Hedge pointed out last week, in addition to higher manufacturing costs related to tariffs on imported steel and aluminum for Boeing, airlines based outside the US may reconsider current and future orders. When you consider that, by Boeing’s own estimates, 38% of all freighter deliveries over the next twenty years will be to airlines based in the Asia-Pacific region, with most of those destined specifically for China, the potential impact of a trade war on US aerospace is substantial.
The first set of tariffs, on the imports on this list, will be collected beginning on 6 July. Tariffs on a second list of items will undergo additional review in a public notice and comment process. The USTR will also provide an opportunity for the public to request that certain items now on the list are excluded, noting that “some US companies may have an interest in importing items from China that are covered by the additional duties.”
