WASHINGTON (REUTERS) - The world's two largest economies, China and the United States, on Friday (Aug 23) exchanged blows in the latest escalation in their trade war that has roiled supply chains and whipsawed financial markets.
China said it would slap retaliatory tariffs on about US$75 billion (S$104 billion) worth of US goods, while US President Donald Trump announced a 5 percentage-point hike in tariffs already in place and others set to take effect next month.
Mr Trump also demanded that US companies take steps to exit China, throwing a new twist into a bitter trade war now in its second year, although Mr Trump cannot legally compel US companies to abandon China immediately.
Beijing's planned tariffs will add as much as 10 per cent on top of existing rates after Mr Trump said he would impose tariffs on another US$300 billion worth of Chinese products.
Washington has long pressed Beijing for wide-ranging economic reforms, including better protection for American intellectual property, ending subsidies that favour Chinese state-owned enterprises, and improving access to China's markets for US companies.
The United States has already imposed tariffs on US$250 billion of Chinese imports. Mr Trump has said bad trade deals with China and others have cost millions of American jobs.
Below are some of the costs of Mr Trump's push to rewrite the terms of global trade with China and other top trade partners:
Fitch Ratings has estimated that extending tariffs to cover another US$300 billion in Chinese goods would chop 0.4 per cent from world economic output.
The International Monetary Fund said last month that global trade in the first quarter of 2019 was the slowest since 2012, noting big downside risks for world growth if more tariffs are imposed.
Mr Trump has said China pays the tariffs he has imposed on Chinese goods, but tariffs are paid by US-registered firms when the products enter the United States. Importers often pass the cost onto consumers via higher prices.
FARMING & ENERGY
American farmers have been among the hardest hit so far. China is the top market for many of their biggest crops and has hit them with retaliatory tariffs, aiming at US farmers because they helped vote Mr Trump into power.
The trade war has hurt sales of many agricultural products, including fruit, meat and grains. Soybeans are the single biggest US agricultural export, most of which went to China before the trade war.
US soybean exports to China were at their lowest level since 2002 in the January-June period, according to US government data. Pork exports are at a nine-year low, and shipments of US sorghum are down 96 per cent from a 2015 peak.
Corn and soybean futures prices tumbled in response to Beijing's announcement. To compensate for lost sales to China, the US government has offered US$28 billion in aid to US farmers, of which about US$8.6 billion had been doled out as of the end of June.
US crude was also on the list of new Chinese tariffs, causing oil prices to drop on Friday. US crude fell 3.47 per cent to US$53.40 per barrel and Brent was last at US$58.56, down 2.27 per cent.
Tech companies were the among the hardest hit on Friday, with tech stocks on the S&P 500 index closing down 3.2 per cent close. The tariff-sensitive Philadelphia chip index slid 4.4 per cent. Shares of chip manufacturer Nvidia Corp lost 5.3 per cent and Apple Inc fell 4.6 per cent.
Tariffs are costing the US tech sector US$1.3 billion a month, the Consumer Technology Association said in a statement to the United States trade representative in June. The US plan for more tariffs would raise the retail price of cellphones by an average of US$70, laptop computers by US$120 and video game consoles by US$56, the association has said.
Apple's AirPod, Apple Watch and HomePod, which have helped the company offset waning sales of its bestselling iPhone this year, will face a 15 per cent levy on Sept 1. MacBooks and iPhones will face 15 per cent tariffs on Dec 15.
The company said in June that the new round of US tariffs would reduce its contributions to the US economy and hurt its global competitiveness.
US retailers say consumers will be hit especially hard by the tariffs due to take effect in two stages, on Sept 1 and Dec 15.
The American Apparel & Footwear Association estimates that 77 per cent of US imports of apparel, footwear and home textiles from China - or about US$39 billion worth of goods - will be hit when the new 15 per cent tariffs kick in on Sept 1.
The tariffs already imposed on China are estimated to cost the average American household US$600 per year, according to a report by JPMorgan Chase. That will rise to US$1,000 if the tariffs on another US$300 billion of US imports take place, the bank added.
Carmakers would be risking significant sales if they abandoned China. General Motors Co last year sold more than 3.64 million vehicles in China, accounting for more than 43 per cent of unit sales globally. Ford Motor Co last year reported revenue in Asia Pacific of US$12.4 billion. Ford does not break out China revenue, but the country accounted for the majority of its sales in that region.
Mr Trump's steel and aluminum tariffs have added billions of dollars to the cost of assembling US vehicles, and tariffs on Chinese-made parts have also hiked costs.
Motorcycle manufacturer Harley-Davidson was hit by retaliatory tariffs from the European Union for the metals tariffs. The company calculates spending US$100 million on tariff costs in 2019.
Motor home maker Winnebago Industries Inc said it expected at least US$10 million in added cost pressures in fiscal 2020 from the latest tariffs and proposed duties.
Equipment manufacturer Deere & Co last week trimmed its full-year earnings forecast for the second time in three months, citing the US-China trade war and bad weather, and said it will cut production at its facilities in Illinois and Iowa in the second half of 2019.
Deere and rival Case New Holland have passed on higher costs from metals tariffs to customers, further lifting farm costs.
OTHER RISING COSTS
Steel and aluminum tariffs were among the first to be levied by the United States in early 2018 and included imports from almost the entire world. The move benefited US steel producers, but not the manufacturers that process the metal.
The tariff burden on US steel and aluminum buyers was almost US$5 billion last year, according to the American Action Forum.