ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Trade war

US imposes new China tariffs, raising levies to pre-WWII level

American duties reach consumer goods in earnest as escalation continues

Smartwatches, including the Apple Watch, are among the highest-value items being hit with U.S. tariffs Sunday.   © Reuters

WASHINGTON/BEIJING -- The U.S. slapped fresh tariffs on Chinese goods on Sunday to bring the average to more than 20%, comparable with levels seen during the protectionist era preceding World War II.

At 12:01 a.m. EDT, the U.S. imposed additional tariffs of 15% on about $110 billion in imports from China, covering 3,243 items. Consumer goods account for about half -- far more than the 20%-plus of the previous round last September, which included such products as furniture. China's corresponding tariffs against U.S. products took effect at the same time.

U.S. President Donald Trump postponed tariffs on 555 items on the original list -- including smartphones -- until Dec. 15 to soften the impact on the year-end shopping season. More than 80% of American imports of these goods come from China, and finding alternative sources is difficult. Higher tariffs are likely to lead to price increases, which risk weighing on consumer spending and thus the broader economy.

Digital consumer devices such as smartwatches are among the largest import categories by value affected by Sunday's tariffs. More than half of all apparel is taxed as well.

China is retaliating with additional duties of 5% to 10% on $75 billion in imports from the U.S. The first tranche covers 1,717 goods including soybeans and crude oil, while the second set being implemented Dec. 15 will cover 3,361 items including autos.

But all told, fewer than 1,800 of these items -- only about 35%, including crude oil -- are new additions. Most have already been hit by previous rounds of tit-for-tat tariffs.

Beijing has already imposed tariffs on about 70% of its imports from the U.S. by value, and after these rounds, the only items left untouched will be those that it would be disadvantageous to domestic industry to tax, such as large aircraft. Previous tariff rounds have already led to sharp declines in imports of affected goods, and further hikes are unlikely to have much of an effect.

With the September duties, the average American tariff on Chinese goods rises to slightly above 21%, up from about 3% before the trade war, according to Chad Bown of the Peterson Institute for International Economics. China's average tariff on imports from the U.S. climbs to nearly 22%.

By comparison, taxes collected on U.S. imports as a share of total value neared 20% in the early 1930s, during an American turn toward protectionism.

After protectionist sentiment around the world contributed to the outbreak of World War II, the U.S. and other nations began to favor free trade. Now, according to the World Trade Organization, only the Bahamas and Sudan -- developing economies seeking to protect domestic industries -- have average tariffs exceeding 20%.

But the pendulum of globalization is now swinging in the other direction.

Fashion brand Ralph Lauren has been building up inventory in preparation for the import taxes. Venerable department store chain Macy's has indicated it will not raise prices even with the tariffs expected to drive up costs. The company will instead source more private-brand products from suppliers outside China.

Hikes after previous tariff rounds showed that "today’s customer doesn’t have much appetite for price increases," CEO Jeff Gennette said in an earnings call in August.

The U.S. and China are slated to hold cabinet-level trade talks in early September, but some in Beijing have said that striking a deal with the mercurial Trump will be difficult.

The pre-World War II tariffs led to escalating protectionism and ultimately a decline in global trade. The current trade war seems to be leaving economic scars as well.

The World Trade Organization's quarterly indicator of global trade growth now stands at its lowest level in nearly a decade. In July, the International Monetary Fund downgraded its global real economic growth forecast for 2019 for the fourth time in nine months.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends April 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media