Free Trade

Trump's Trade War Officially Begins

China promises to retaliate.


Gerard Bottino/CrowdSpark/Newscom

Begun, the trade war has.

The Trump administration's 25 percent tariffs on $34 billion worth of Chinese goods—hitting everything from industrial machinery to consumer goods such as televisions—went into effect Friday morning, prompting threats of an immediate response from the Chinese government, which also promised to haul the United States in front of the World Trade Organization.

"In order to defend the core interests of the country and the interests of the people, we are forced to retaliate," the Chinese Commerce Ministry said in a statement shortly after the tariffs took effect.

Trump has promised another round of tariffs on $16 billion of additional Chinese goods if China follows through with its threat to retaliate. China did not specify what items would be targeted with retaliatory tariffs, but it has previously threatened to hit American agricultural products such as pork and soy beans. America is the world's largest exporter of soy beans, and China is the world's largest consumer of them.

A ship loaded with soy beans was racing the clock this week to reach China before any retaliatory tariffs could be imposed. Soy bean prices fell to nearly 10-year lows this week in anticipation of China's response.

While the administration says the trade barriers will force China to stop stealing American intellectual property, it appears more likely that non-Chinese businesses will bear the brunt of the tariffs, according to an analysis by the Peterson Institute for International Economics.

"The tariffs are aimed at patent-intensive industries that rely on global supply chains, disadvantaging American producers and harming US allies operating in the region," the PIIE analysis concludes.

Source: Peterson Institute for International Economics

That's exactly the message that dozens of business owners delivered to the Commerce Department and the Office of the U.S. Trade Representative prior to the administration's decision. But Trump failed to heed those warnings, promising last weekend that "everything will work out" even as the warning signs of a trade war became clearer.

Now he has his war. He will have to take responsibility for the results.