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Trade Tensions Refuse to Die Down: All You Need to Know

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Step-up in trade tensions

The trade war intensified again yesterday as President Donald Trump announced that the United States (SPY) (IVV) would impose tariffs on $200 billion worth of Chinese goods starting on September 24.

While the initial tariff rate will be 10%, it will rise to 25% starting in 2019. Previously, the United States imposed tariffs on $50 billion worth of Chinese goods, and China retaliated in kind. Trump is also mulling over whether to impose tariffs on $267 billion worth of additional Chinese products.

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China’s retaliation

In a statement, President Trump said, “If China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”

Due to the lopsided trade, China (FXI) will not be able to respond with a dollar-for-dollar retaliation on tariffs. However, it has warned that it will impose tariffs on $60 billion worth of US goods in addition to other countermeasures. Read Could China Disrupt US Supply Chains in Retaliation? to learn more.

Some items exempted

Another thing to note about the $200 billion worth of goods is that the US administration has withdrawn about 300 items from the initially proposed list, including smartwatches and other consumer electronic products and chemicals.

This development likely comes as a relief to Apple (AAPL), which recently stated that the next round of tariffs would affect its products such as the Apple Watch and AirPods. However, the company could still come under pressure if China retaliates, which could affect its iPhone production there.

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