The back-and-forth incremental increases in US import tariffs and retaliations against US exports continued through July and into August. Despite the stay in new US – European tariffs, the US has continued to expand the overall scope of import impediments, especially focused on China. The earlier tariffs on $34 billion in US imports from China took effect July 6th. Additional US tariffs threatened against China are now up to the $500 billion level.
China’s retaliation against $34 billion of imports from the US also started July 6th. China has announced additional retaliation subsequently, although China doesn’t have $500 billion of imports from the US to mirror retaliation at that level. Instead China has announced 25 percent tariffs on another $16 billion of imports from the US and implied a broadening of trade retaliation, even to individual companies such as Apple. The new retaliatory tariffs cover containerized and non-containerized goods and are schedule to take effect August 23rd.
The Trump Administration’s trade score cards, the US trade balance with each trade partner country, is important to watch for changes that could justify the Administration deescalating the trade war tariffs. With respect to China, a shrinking of the trade gap indicates winning for the Trump Administration, with the monthly gap falling from June to July. But not by much, declining from $28.97 billion to $28.09 billion. That has happened while the yuan has lost value against the dollar, dampening the impact on the volume of Chinese exports and amplifying the impacts of retaliation against US exporters.
None of this sounds positive for trade, although in the near-term trade policy turmoil has boosted trade volumes so far this year. Shippers accelerating trade has added to the underlying strong consumer trade demand in 2018, with tariffs not actually in force long enough to have started to reduce volumes. If a truce in the trade wars could be reached quickly, it is possible the accelerated shipping in 2018 will actually add to total 2018 trade volumes. More likely, the tariff impacts on volumes will be negative and are still ahead in 2018.