From Fish to Handbags: U.S. Threatens Tariffs on $200 Billion of Chinese Goods

WASHINGTON — The Trump administration escalated its trade dispute with China on Tuesday, saying it would impose tariffs on roughly $200 billion worth of Chinese fish, petroleum, chemicals, handbags, textiles and other products if China does not change its trade practices.

The threat comes just days after President Donald Trump fired the first shot in the trade war by imposing levies on $34 billion worth of Chinese goods, including robotics, airplane parts and ball bearings. Trump has said he is prepared to tax as much as $450 billion worth of Chinese products. On Tuesday, his administration detailed the next list of products that would face Trump’s wrath if Beijing does not fold to Washington’s demands, which include reducing its trade surplus with the United States, halting intellectual property theft and opening its markets to U.S. companies.

The announcement is a significant escalation in the trade dispute between China and the United States — neither of which appears eager to blink first. China has responded to Trump’s initial $34 billion in tariffs with its own equal amount of levies on U.S. goods like pork, steel, cars and fiber optic cable and has said that it is prepared to continue retaliating if Trump does not cease.

With no official discussions scheduled to resolve the trade dispute, it is unclear how or when the differences get resolved. A senior White House official said Tuesday evening that the administration welcomed China’s engagement and had been “extremely clear” with China about its concerns over its trade practices, but that China had been “nonresponsive.” The official said that the process of imposing tariffs on the $200 billion list would take roughly two months, with a public hearing on the tariffs scheduled for Aug. 20-23.

The trade war has already started to raise costs for businesses that depend on international supply chains, from manufacturers to retailers, and consumers that buy their products. The Trump administration said it intended its first wave of tariffs to target industrial products that the Chinese government subsidizes and to minimize the impact to U.S. households.

But as the list of taxed products grows, the number of consumers and businesses that will be negatively affected by the tariffs also increases, economists said.

“It gets harder for them to keep it from the shelves of Walmart and Target and Best Buy,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “It also gets harder for them to continue to hide behind this rationale of hitting China for forced technology transfer.”

The administration’s approach has prompted criticism from lawmakers, particularly those from farm states, who say Trump is approaching a serious issue in an undisciplined way that could backfire.

Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee, said that he supported the administration’s effort to crack down on Chinese practices, but that the decision to use tariffs was not the proper response.

“Tonight’s announcement appears reckless and is not a targeted approach,” Hatch said. “We cannot turn a blind eye to China’s mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy.”

The administration disagrees. Robert Lighthizer, the U.S. trade representative, said in a statement that the announcement was “an appropriate response.”

“Rather than address our legitimate concerns, China has begun to retaliate against U.S. products,” he said. “There is no justification for such action.”

Eswar Prasad, a professor of international trade at Cornell University, said that it was hard to see a path to cooling off tensions, especially with the highly charged midterm election season approaching in the United States.

“With China in attack mode as well, additional tariffs risk escalating the trade war to a level from which it is becoming increasingly difficult to envision an exit path,” he said.

For now, the limited tariffs combined with a booming economy seem to be having little impact beyond targeted industries. But Federal Reserve officials are worried about potential damage from a prolonged trade war. Goldman Sachs economists estimated this week that the initial tariffs on Chinese goods would reduce the size of the U.S. economy by a minimal amount, and said that they did not expect the White House to follow through on Trump’s threatened tariffs on $200 billion worth of imports.

Economists at IHS Markit said this week that the first wave of tariffs, and China’s retaliatory tariffs that followed them, “had little impact” on projected economic growth.

But that could quickly change, depending on the length and severity of the trade war.

Minutes from the Fed’s June meeting show continued worries about possible tariff escalation. Fed officials’ business contacts “indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy,” the minutes show.

Goldman economists said in a report this month that, if the broader range of tariffs were enacted, it would be more damaging because it would hit Americans more quickly in the wallet than the initial round of tariffs.

“We expect that the economic effects of additional rounds of tariffs would be proportionally greater than the effect of the tariffs announced to date,” the Goldman economists wrote, “as they would eventually apply to products that are imported mainly for consumption rather than intermediate inputs and where China accounts for a large share of total imports, making diversion from other import sources more difficult.”