On Thursday, a new round of tariffs are due to go into effect between the U.S. and China. The two countries continue crafting financial trade barriers in the back and forth over business.
In the week ahead, each country will begin levying a 25 percent tax on $16 billion of goods from the other. Chemicals, tractors and industrial equipment are among the 279 Chinese-made products facing the tax. Polystyrene, fertilizer machinery, and railway freight cars all face the new tax if they are brought into the American market.
The chemical and plastic tariffs will find their way into the supply chain for all kinds of items used by companies and consumer alike: everything from coffee lids to yogurt containers to PVC pipes and aircraft tank sealants. China, meantime, will tax U.S.-made cars, buses and medical instruments, among other items.
Another round of tariffs are under considering by the Trump administration. The comment period of that list of Chinese imports ends in early September. If it moves forward, it would increase the tax from 10 to 25 percent on another $200 billion of Chinese imports. China has threatened its own round of taxes on $60 billion of American goods in retaliation. All this followed the first round of eye-for-an-eye tariffs in July.
The threats have turned into tariffs while the two countries have not been talking. The last official round of trade talks was early June. The two sides have agreed to another meeting sometime before the end of this month in Washington, but it will be among lower-level officials. Investors should not expect an immediate breakthrough after weeks of silence.
Stocks rallied when news of the renewed trade talks was released, illustrating just how sensitive investor sentiment is to the trade issue. As new taxes start, investors will be listening for assurance the tough talk on trade isn't escalating the stakes.
Tom Hudson hosts “The Sunshine Economy” on WLRN-FM; @HudsonsView.