On Monday, another round of US tariffs on US$200 billion (S$274 billion) worth of Chinese imports will go into effect, on top of the US$50 billion already in place. China will retaliate with tariffs on US$60 billion worth of US goods. US President Donald Trump has threatened that retaliation will trigger more tariffs on an additional US$267 billion of imports from China. And so it will continue, until almost all trade between the world's two largest economies is "tariffed". The global economy has an escalating trade war on its hands. It promises to be a futile and destructive battle that will fail to achieve its purported objectives.
The pain will be felt by both sides, as well as third parties. US producers who import inputs from China will face higher costs, and in many cases, will pass them on to consumers. The latest round of US tariffs is also squarely aimed, with some exceptions, at consumer goods - so US consumers will feel the direct impact. US farmers, wine producers and manufacturers selling into the Chinese market will be hurt by the Chinese tariffs. Chinese producers - across the manufacturing sector - will also feel the pain. Companies from third countries that are part of the supply chains centred in China will face dislocations as those supply chains get disrupted. In both China and the US, economic growth and inflation would be negatively affected.
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