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US to hike China tariffs but ultimately a trade deal remains a likely outcome


US to hike China tariffs but ultimately a trade deal remains a likely outcome

us trade tariff hike
us trade tariff hike
Photo: Reuters

The US is expected to hike tariffs on $200 billion worth of Chinese imports from 10% to 25% just after midnight US Eastern Time today (0400 GMT).

The move was announced by US President Donald Trump on May 5, with China’s Commerce Ministry saying it “will have to take necessary countermeasures” if tariffs are increased.

The escalation in the trade war follows weeks of optimism around trade talks, which are believed to be in their final phase.

Despite ongoing trade negotiations, Mr Trump believes progress is too slow and is concerned China is backtracking on key issues, including on intellectual property.

While initial negotiations reached consensus on simpler issues—including Beijing increasing purchases of US products, increasing market access for foreign companies and reforming its investment law—sticking points remain. Key hurdles include reforms to China’s intellectual property laws and how an ultimate trade deal will be enforced.

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Today’s tariff hike is widely seen as a negotiating tactic. As such, it remains likely that a trade deal will be struck in the coming months—not least because Mr Trump needs a foreign policy ‘win’ as he heads towards re-election in November 2020. It remains to be seen whether a deal will include deep reforms in China, or if it will merely be an agreement for the Middle Kingdom to purchase more US products.

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