As the US and China plunge into a tit-for-tat trade battle, we look at what’s at stake

What is a tariff?

Tariffs are border taxes charged on foreign imports. Importers pay the applicable charges at the point of entry to the customs agency of the country or economic bloc imposing them.

Rather than being used to raise revenue, they are imposed to increase the price of foreign goods in order to make domestic produce comparatively cheaper, with the aim of encouraging domestic production by protecting local firms from global competition. According to tariff supporters, this can help to save jobs that might otherwise go overseas.



Why is Trump targeting China with tariffs?

Donald Trump believes Beijing is using unfair trade practices to gain an advantage on the US, which he says includes the “theft and abuse” of intellectual property rights of US firms, such as Hollywood films or IT systems.

He has also accused China of subsidising steel exports in a practice amounting to dumping – selling a product at an artificially low price – on the rest of the world, which he argues has hurt jobs in the US. He also takes issue with the size of the US trade deficit, or the imbalance between exports and imports, with China.

How big is US trade with China?

According to official figures, the US racked up a trade in goods deficit of $375.6bn (£283.1bn) with China last year, meaning America bought far more from the world’s second largest economy than it has managed to sell to it.

US exports of goods totalled $129.9bn last year, while imports from China were $505.5bn. Exports to China support about 1m American jobs, according to the US-China Business Council, while aircraft and soybeans are the most valuable items sold to China. Mobile phones, computers, toys and games are the biggest imports to the US from China.

China denies it will be first to impose tariffs on $34bn of US goods Read more

What goods are affected?

The White House is imposing tariffs on Chinese goods including boats, aircraft engines, nuclear reactors and other industrial and agricultural machinery, as part of a wide-ranging list of 818 types of product. The US has imposed tariffs worth $34bn on China so far, although it will introduce a second round covering 284 more products at a later date, taking the total to $50bn.

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Beijing is targeting the same value of goods, although has taken a different approach to slap tariffs on fewer American goods across broader categories. Its list includes soybeans, which will hit agricultural communities usually loyal to the president, as well as other goods such as cotton, corn, tobacco and cars.



How will it affect other economies?

Mark Carney, the governor of the Bank of England, warned this week that further escalation of Trump’s trade disputes would hurt the American economy most, with potential to lower US economic growth by around 5%.

Publishing forecasts by the UK’s central bank, Carney warned that the American economy would suffer a 2.5% drop in GDP as a result of falling trade volumes alone over three years, should the White House increase US import tariffs by about 10 percentage points on all of its trading partners.



The world economy would take a hit to GDP of just over 1%, while there would be a smaller impact on the EU and the UK.