China strikes back with fresh tariffs on US after America raises rates, as global trade war escalates
pic: Adobestock
Just under a month on from tackling the thorny subject of trade tariffs in this column, and it has swiftly escalated to become a full-on trade war between the US and China, in a return showdown from 2018 that played out over 18 months.
The potential fallout from the America president’s decision on this fresh round of global tax rises is of considerable proportions, with economies across Asia, Europe and rest of the world left with uncertainty as to when this latest round of disputes will be resolved, if at all.
This week, the US placed renewed tariffs on China raising them from 54% to 104% after China opted to reciprocate in kind with its own 34% tax on the US, which it has now raised to 84% in response to America’s extension of its own measures. Can, and will these figures go higher? It’s certainly not hard to image that being the case given the tensions that exist between the two global superpowers.
According to the White House, the taxes are being introduced described as part of what it has fashioned as measures to counter “nations having ripped us off for decades” – a statement that comes despite America remaining as the largest economy in the world. It continues to enjoy a wealth of global trade advantages in leveraging its considerable strengths in technology, digital services and agricultural assets, but according to most analysts one of the root decisions to attempt to raise more tariffs is in encouraging companies to return more manufacturing to the US from overseas. This would literally be reversing many decades of trading patterns, and it seems there is little international appetite for this as a trading concept.
After just a week of the policy wars erupting, the impact is already being felt. Notably, some 6 trillion reportedly being wiped off Wall Street values over trade disputes that has left economist and market analysts uneasy about quite where the final position will end up, with financial markets in Europe, Japan and other areas of South East Asia all being hit by the policy turbulence. The one thing that money markets hate is uncertainty, and we now have that in spades.
According to a wide range of analysts and news outlets, the upshot of the tariffs being placed on more than a hundred countries is that consumers in the US (as well as many other locations around the world) is anticipated to be one of consumers paying a significant amount more for a wide range of goods, which is an unwelcome scenario for economies everywhere.
This clearly extends to the food and drink market, and confectionery, snacks and bakery markets are in now way exempt from this, which comes across already challenging conditions in which cocoa prices soared to $12,000 a tonne earlier this year. After a brief respite in the past couple of months, they are now returning to higher levels once again. These are costs that are being passed on directly to customers, which in turn is impacting consumers buying patterns, which is negatively impacting on the sector.
Whether there will be agreements struck on the normalisation of trade around the world is hard to see in the eye of the storm, but for the moment at least, it feels like a pretty wild economic ride for all involved.
Neill Barston, editor, Confectionery Production
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