Donald Trump escalates tariff war with China, India will be watching closely

US president Donald Trump’s decision to hike tariffs on Chinese goods by additional five % has escalated the trade war between the two countries. India will be watching these developments very closely as the only other country, apart from China, to have hit back against Trump’s unilateral duty hikes.

After roiling markets with tweets lashing out against new Chinese tariffs and urging American companies — saying they are “hereby ordered” — to leave China, US president Donald Trump on Friday slapped an additional 5% levy on existing and planned duties on Chinese goods.

“Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25%, will be taxed at 30%,” he wrote in a string of tweets, adding, “Additionally, the remaining 300 BILLION DOLLARS of goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%.”

In effect, $250 billion worth of Chinese imports that were already under 25% tariff will now be subjected to 30% starting October 1, and the 10% duty on imports worth $300 billion, that was to come into effect on September 1, is raised to 15%. These are taxes that will ultimately be borne by US companies manufacturing or sourcing their products from China — such as Apple — and American consumers. President Trump understands that as a lifelong businessman but he has been loathe to acknowledge it for fear, presumably, of weakening his fight against China.

India will be watching these developments very closely as the only other country, apart from China, to have hit back against Trump’s unilateral duty hikes. In June, it announced the delayed implementation of new and increased tariff on 28 US products, unofficially worth around $215 million.

That may look small compared to the total value of annual India-US bilateral trade that stands at around $142 billion, but it carried an outsize message as it was announced after, and in retaliation to, the United States revoking India’s eligibility for a preferential zero-duty trade programme called Generalized System of Preferences that allowed more than $5.5 billion worth of Indian goods to enter the US without import duty.

The Trump administration had made its continuance conditional to Indian conceding more access to its markets.

Trump announced the additional import duties on Chinese products after the close of markets that had fell by almost 600 points due to, according to most experts, his tweets in the morning, lashing out against the new Chinese tariffs on $75 billion of American goods, which seemed to have been timed strategically just an hour before a much anticipated policy speech by federal reserve chairman Jerome Powell and ahead of Trump’s departure for the G-7 summit in Biarritz.

Trump tweeted in a series saying, among other things, “we don’t need China and, frankly, would be far better off without them” and , most widely noted and commented upon, “our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA”.

The US president does not have the authority to unilaterally decide American companies’ place of operation and his tweet confounded US companies and analysts. “I have no idea how the president thinks he can order companies to stop working with China. I’m baffled,” Brian Riedl, a budget expert at the conservative Manhattan Institute, said to the Washington Post.

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