The US-China Trade War Summarized In One Chart

With the US and China now actively engaged in several rounds of tit-for-tat tariffs and retaliations, it is easy to lose track of a) where we currently are in the escalating trade standoff and b) what has actually been implemented.

As a handy guide, Goldman reminds us that in the latest overture by the US on June 18, the White House announced that it would impose 10% tariffs on an additional $400 billion of products from China if intellectual property policies and related issues are not addressed or if China retaliates; China vowed to retaliated immediately.

Put in context, this would potentially involve tariffs on two successive rounds of $200 billion each. And since previously, President Trump had previously proposed a 25% tariff on a second round of $100bn in imports from China, this latest proposal amounts to a net $300bn increase in products affected.

If implemented this would raise the total amount of tariffs the Trump administration has proposed from around $500bn to nearly $800bn, or about 4 times the cumulative amount that had been proposed as of a month ago, before President Trump proposed tariffs on global auto imports on national security grounds.

All of this is summarized in the chart below, which perhaps more importantly also shows that up until now, the amount of US imports actually subject to implemented tariffs is virtually negligible compared to what has been proposed. However, that may change very soon as the first round of the trade war with China takes effect on July 6.

As a first bonus chart, Goldman shows how the first rounds of 25% tariffs would compare with hypothetical later rounds. It finds that in the first round of $34bn in imports, imports from China account for only 8% of total imports in the affected categories, and 23% of imports from low-cost countries. In subsequent rounds, these shares rise, and if the White House moved forward with the proposed tariffs on an additional $200bn in imports, imports from China would account for more than half of total imports from low-cost countries, leaving little room for substitution from other US trading partners.

Finally, here is Goldman's estimation of the potential composition of the next group of $200bn in imports that the White House might impose tariffs on. It is meant to reflect the basics of the USTR process, which aims tariffs at import categories where China represents a small share, ideally less than 1/3 of total imports.

Columns 1 and 2 show US imports from China in each category of goods on which USTR has already proposed to apply a 25% tariff. The third and fourth columns, under “Potential Retaliation,” show value for each category we estimate as most likely to be subject to a 10% tariff should the US choose to impose tariffs on an additional $200bn of goods. In our view, the US is likely to respond first with tariffs on remaining goods that are relatively easy to substitute (column 3). A low share of imports from China (column 5), a higher share from low-wage countries excluding China (column 6), and a lower share of goods from high-wage countries (column 7) would suggest relatively easy substitutability and thus a higher likelihood of being subject to tariff in the next round.

Comments

Bush Baby GlassHouse101 Thu, 06/21/2018 - 13:23 Permalink

The corrupt Chinese will bypass the duty increases by simply declaring an invoice value representing 90% of the actual invoice value and then have the USA importers do 2 wire transfers. One for the 90% and one for the 10%.

 

The wire for the 10% will go to a third country holding company and declared as a selling commission on the transaction.

Commissions are not dutiable.

 

http://www.npllptradelaw.com/buying-and-selling-commissions/

 

 

 

 

 

In reply to by GlassHouse101

CashMcCall GlassHouse101 Thu, 06/21/2018 - 12:41 Permalink

The US makes more weapons than any other nation. Though those are state-owned Defense companies essentially. They have no overhead. The Gov pays for feasibility studies, prototyping, cost overrides, production, production overrides, contract procurement, etc. Then when they convert a military design like a truck or an aircraft to civilian use, the Taxpayer gets nothing even though they footed the bill for the whole mess. 

In reply to by GlassHouse101

CashMcCall GlassHouse101 Thu, 06/21/2018 - 12:35 Permalink

I really like your concise post and the "counterfeit lifestyle" metaphor. I am going to add the mathematical proof of your statement below. You don't need to read it because you already understand it. It is for the Trumptards and their endless stale China bashing and calls for Socialism price fixing. 

 

You have Trump blowing off that the Chinese are Currency Devaluers but here is Trump applying Tariffs and devaluing the Yuan next to the Dollar. Trump makes no sense at all. He is just a wall of unschooled ego. The Yuan and virtually all emerging market currencies are being devalued against the Dollar which is rising on geopolitical concerns. Trump has already defeated his own tariffs. Tariffs imposed by the buying country, always devalue the exporting country's currency. 

IF Tariffs were a good idea then Smoot Hawley would have been a massive success instead of an abysmal failure that converted a recession into the Great Depression lasting 15 years! Tariff have failed every time they were tried. If Tariffs worked then Nixon would be perceived as a genius instead of driving the country into a massive recession. If they had worked "W" Bush would have already corrected all the woes of the US Steel making industry instead of causing the demise of 40% in the now famous BUSH RECESSION... you know the TARP recession. 

 

I will go one step further. The actual term Trade Deficit is what happens after a transaction occurs. For example, you buy a Japanese car and you pay US Dollars. The exchange is fair and both sides of the exchange are satisfied. NO ripoff as Trump alleges. But after the transactions occur the buying currency is supposed to be reduced incrementally and the selling currency is supposed to be increased incrementally. That is what would happen in a free market. But the opposite happens. The High Dollar policy of the US keeps the dollar moving higher and the Japanese Yen devalues to remain competitive. Thus the Trade Deficit is a way of quantifying the US Dollar's failure to market adjust. While it is a negative number that simply means the US consumers got products for less than a free market exchange. This also allows the US to export its inflation. 

I am stunned that Economists, in particular, allow Trump to imply there is a dollar deficiency on the imported goods. Trump is misusing the term as if it demonstrates indebtedness. Nothing could be further from the truth. In fact the Deficit of payment only results when the Dollar is used to buy foreign goods. If the Yuan was used, there would be a relative parody. Trump is dangerously ignorant.

The frenzy over China is absurd. It is not the cause of US economic woes. The US is flirting with socialism and massive debt. You can't expect the rest of the world to pick up the debt tab over the long haul and they won't. Hegemony is real and it is here now. That should scare you blind Trump supporters. Each time the dollar rises, it triggers a massive devaluation of dozens of global currencies which further erodes US Exports. 

The goldman charts are absurd. The whole point of trade before Trump changes the subject to IP which is no longer much of an issue with China imposing new laws to protect its own IP, is the exchange rates between nations. So if Trump raises tariffs he devalues the currencies of those exporting to the US. The only big loser is the US Consumer. The Tariffs' costs in the exchange are nullified. All Trump is doing is raising your taxes, trade will be unaffected other than to watch the US Trade Deficit grow. 

I am always stunned by Trump's lack of mathematical understanding. He is a terrible negotiator and businessman. His Television City project fell apart because he couldn't get along with anyone. LOL. 

Worse for Trump is when other nations such as Canada and South Korea, apply their own independent Tariffs against the US. This amounts to new Tariffs targeting Agricultural products and oil. So the US could get tariffs levied at a 10 to 1 ratio to a country, the USA, that can't export products because of the manipulated High Dollar Policy refuses free market adjustments. 

There is simply no argument that Trump's Trade Tariff have or will have any benefit to the USA but it will devalue virtually all global currencies next to the dollar exacerbating the US Trade imbalances with all nations. 

In reply to by GlassHouse101

hedgeless_horseman Dirtnapper Thu, 06/21/2018 - 11:46 Permalink

 

You mean to tell us that China hasn't been slamming import fees on US goods and it's just old mean Trump slamming the helpless Chinese just for spite?

Are you saying that China is raping us by placing tariffs on our goods? 

Hypocrisy is the practice of engaging in the same behavior or activity for which one criticizes another. 

https://en.wikipedia.org/wiki/Hypocrisy

 

In reply to by Dirtnapper

z0na8an0z hedgeless_horseman Thu, 06/21/2018 - 11:41 Permalink

China is doing it, because we are letting them.  Your position has changed from "Explain to me how the US is getting shafted in this scenario" to "it's our own damn fault". So what's your real point then? Oh that's right, your last line...something, something Israel is the cause of all worldly problems, especially the US parasitic class in government allowing China to run roughshod over the US. (Admittedly, these politicians are corrupted by MANY foreign interests, including Israel) Really cute that you've jumped to some babble about victimhood, smells an awful lot like projection in here.

In reply to by hedgeless_horseman

hedgeless_horseman z0na8an0z Thu, 06/21/2018 - 12:41 Permalink

 

Your position has changed from "Explain to me how the US is getting shafted in this scenario" to "it's our own damn fault". 

"Explain to me how..." isn't a position.

I did respond that his explanation of our deindustrialization isn't an action of China.  

TMosley regularly speaks out against Israel playing the victim, so I was giving him a bit of his own medicine.

 

In reply to by z0na8an0z

EddieLomax hedgeless_horseman Thu, 06/21/2018 - 11:31 Permalink

Even staid and stuffy electronics professionals here talked years ago about how making products out in China you would find the product quickly copied (even from the same production line, grey microchips) and someone in China putting you out of business.

Its basically the same business model Amazon does, you list a product up there, if its successful Amazon can then list their own one next to it a bit cheaper.

Of course its all the "free market" where a company in Europe or US has to abide by environmental and employee regulations competing against slave labour backed by government borrowing, very fair.

In reply to by hedgeless_horseman

CashMcCall EddieLomax Thu, 06/21/2018 - 12:55 Permalink

Another Marxist response crying an ocean for the Unioner sitting at the bar waiting for you to pay his tab. Go away. The US has the most litigious workforce in the world. More disability in the US than all other nations combined. You have OSHA, the EPA, and State and Local Gov taxing to the hilt. Obamacare. You think companies should provide DayCare and give hiring preference for the Diversity employee over merit. The US killed its own businesses one union, one regulation at a time. 

In reply to by EddieLomax

TeethVillage88s hedgeless_horseman Thu, 06/21/2018 - 11:41 Permalink

Well it is  not like we are driving our own bus.  Elites make plans, follow agendas, money flows to the top 1% no matter what.

" Keep the status quo and let China raping us forever? "

MMT Economics states that 1) we can keep printing money or digits as long as Inflation known as PCE and CPI are under control 2) Printing fiat should balance population growth 3) trading fiat with foreign partners is fine because we get their labor and their resources

- Foreign Ownership of US Assets is $35.5 Trillion USD Value.  I guess we give away our country.  In fact seems like wealth is extracted from households and is going to China and Wealth Investors/Bankers/Underwriters

- The Laws are just for peons

- Jails & Church are for Social Control of the Fascist Variety... Offshoring also is Social Control and Wage Control.  Making Housing Investment Vehicle is also Social Control and Wealth Extraction.

- The Agenda and Reforms will mainly benefit the Rich, every time.

In reply to by hedgeless_horseman

RagnarDanneskjold hedgeless_horseman Thu, 06/21/2018 - 11:44 Permalink

China is not raping us. The prior decision makers were whores. 

The US prints reserve currency, that's a big problem for productive Americans. They don't get those USDs. They're paying the cost of this system in lost jobs, communities destroyed, dead children from pointless overseas wars and mass immigration that suppresses their wages.

In reply to by hedgeless_horseman