Just two days after Larry Kudlow, the new White House economic advisor, said President Donald Trump’s threatened tariffs against Chinese imports were just a negotiating ploy, which calmed financial markets, Trump upped the ante, causing panic once again.
Trump threatened to levy tariffs on an additional $100 billion worth of Chinese imports, on top of the $50 billion he had already planned.
That latest threat, plus an unexpectedly weak jobs report, sent stocks falling Friday, with the Dow Jones industrial average and S&P 500 both dropping more than 2%.
Analysts at Moody’s Investors Service say the latest proposed tariffs, which are “much larger in magnitude than the measures implemented so far …. could carry more material macroeconomic effects if fully adopted.”
What’s been implemented so far are U.S. tariffs on $14.9 billion of Chinese exports to the U.S., representing 0.71% of total Chinese goods exports and 0.13% of Chinese GDP, according to Moody’s. The tariffs range from 10% on aluminum exports to up to 50% on washing machines.
China has responded by imposing tariffs on about $3 billion of U.S. exports, representing 0.21% of total U.S. goods exports.
Now Trump is threatening 25% tariffs on billions of dollars more of Chinese exports to the U.S., which creates “increasing uncertainty [that] will weigh on business investment and potentially on firms’ decisions on where to locate portions of global supply chains,” according to Moody’s.
The conservative Tax Foundation says a 25% levy imposed on $150 billion worth of imports from China “is equivalent to nearly $38 billion tax increase on American firms and consumers in 2018” and “could potentially claw back many of the benefits that businesses and households expected to see” from the sweeping tax overhaul passed in December.