Days after the Trump administration made good on their promise to raise Section 301 tariffs on Chinese imports, China's State Council Customs Tariff Commission announced new tariffs on $60 billion worth of U.S. goods. China's latest tariffs on 5,140 products will take effect on June 1, adding up to 25% to the cost of U.S. goods that are covered by the new policy.

China’s latest counter-strike was expected after the U.S. raised Section 301 tariffs on May 10. Speaking about the likelihood that China would retaliate with their own set of tariffs, President Trump's top economic adviser Larry Kudlow said, "I reckon they will. We'll see what they come up with."

In response to China’s retaliation, the U.S. Office of the Trade Representative prepared a list of proposed tariffs on $300 billion worth of Chinese goods on May 14. The wide list of goods ranges from artist’s paintbrushes to watches, and includes an array of sporting goods and agricultural products. Food staples such as rice and tea are included on the proposed list.

"The proposed product list covers essentially all products not currently covered by action in this investigation," the USTR office says. "[It] excludes pharmaceuticals, certain pharmaceutical inputs, select medical goods, rare earth materials, and critical minerals."

According to NPR, the USTR’s proposal will enter a public comment period and could take effect sometime in late June or July.

Who pays?

The trade war retaliatory exchange is dealing a heavy blow to global stock markets. On May 13, the Dow Jones Industrial Average dropped 2.4%, and Nasdaq closed out the day with a 3.4% drop. They are slow to recover in recent days.

According to President Trump, the U.S. can “… take in $120 billion a year in tariffs. Ultimately it's paid for largely by China." Kudlow, on the other hand, attests that both China and the U.S. will absorb some of the cost, saying "both sides will suffer on this."

Jake Parker, speaking for the U.S.-China Business Council in Beijing points out that some of the cost may present itself in the form of lost business, saying, "The reputation of U.S. companies as reliable suppliers has also taken a hit.” Since U.S. companies are struggling to find stable manufacturing and sourcing sites, “Many customers are beginning to diversify away from U.S. products towards other suppliers, because the consistency in price and supply can no longer be guaranteed because of the uncertainty of these tariffs."

If you’d like to catch up on the ongoing U.S.-China trade war, visit our recent blog post or NPR.