(Reuters) - The world’s two largest economies, China and the United States, on Friday exchanged blows in the latest escalation in their trade war that has roiled supply chains and whipsawed financial markets.
China said it would slap retaliatory tariffs on about $75 billion worth of U.S. goods, while President Donald Trump announced a 5 percentage-point hike in tariffs already in place and others set to take effect next month.
Trump also demanded that U.S. companies take steps to exit China, throwing a new twist into a bitter trade war now in its second year, although Trump cannot legally compel U.S. companies to abandon China immediately.
Beijing’s planned tariffs will add as much as 10% on top of existing rates after Trump said he would impose tariffs on another $300 billion worth of Chinese products.
Washington has long pressed Beijing for wide-ranging economic reforms, including better protection for American intellectual property, ending subsidies that favor Chinese state-owned enterprises, and improving access to China’s markets for U.S. companies.The United States has already imposed tariffs on $250 billion of Chinese imports. Trump has said bad trade deals with China and others have cost millions of American jobs.
Below are some of the costs of Trump’s push to rewrite the terms of global trade with China and other top trade partners:
Fitch Ratings has estimated that extending tariffs to cover another $300 billion in Chinese goods would chop 0.4% from world economic output.
The International Monetary Fund said last month that global trade in the first quarter of 2019 was the slowest since 2012, noting big downside risks for world growth if more tariffs are imposed.
Trump has said China pays the tariffs he has imposed on Chinese goods, but tariffs are paid by U.S.-registered firms when the products enter the United States. Importers often pass the cost onto consumers via higher prices
American farmers have been among the hardest hit so far. China is the top market for many of their biggest crops and has hit them with retaliatory tariffs, aiming at U.S. farmers because they helped vote Trump into power.
The trade war has hurt sales of many agricultural products, including fruit, meat and grains. Soybeans are the single biggest U.S. agricultural export, most of which went to China before the trade war.
U.S. soybean exports to China were at their lowest level since 2002 in the January-June period, according to U.S. government data. Pork exports are at a nine-year low, and shipments of U.S. sorghum are down 96% from a 2015 peak.
Corn and soybean futures prices tumbled in response to Beijing’s announcement.
To compensate for lost sales to China, the U.S. government has offered $28 billion in aid to U.S. farmers, of which about $8.6 billion had been doled out as of the end of June.
U.S. crude was also on the list of new Chinese tariffs, causing oil prices to drop on Friday. U.S. crude fell 3.47% to $53.40 per barrel and Brent was last at $58.56, down 2.27%.
Tech companies were the among the hardest hit on Friday, with tech stocks on the S&P 500 index closing down 3.2% close. The tariff-sensitive Philadelphia chip index .SOX slid 4.4%. Shares of chip manufacturer Nvidia Corp (NVDA.O) lost 5.3% and Apple Inc (AAPL.O) fell 4.6%.
Tariffs are costing the U.S. tech sector $1.3 billion a month, the Consumer Technology Association said in a statement to the United States trade representative in June. The U.S. plan for more tariffs would raise the retail price of cellphones by an average of $70, laptop computers by $120 and video game consoles by $56, the association has said.
Apple’s AirPod, Apple Watch and HomePod, which have helped the company offset waning sales of its bestselling iPhone this year, will face a 15% levy on Sept 1. MacBooks and iPhones will face 15% tariffs on Dec. 15.
The company said in June that the new round of U.S. tariffs would reduce its contributions to the U.S. economy and hurt its global competitiveness.
U.S. retailers say consumers will be hit especially hard by the tariffs due to take effect in two stages, on Sept. 1 and Dec. 15.
The American Apparel & Footwear Association estimates that 77% of U.S. imports of apparel, footwear and home textiles from China - or about $39 billion worth of goods - will be hit when the new 15% tariffs kick in on Sept. 1.
The tariffs already imposed on China are estimated to cost the average American household $600 per year, according to a report by JPMorgan Chase. That will rise to $1,000 if the tariffs on another $300 billion of U.S. imports take place, the bank added.
Carmakers would be risking significant sales if they abandoned China.
General Motors Co (GM.N) last year sold more than 3.64 million vehicles in China, accounting for more than 43 percent of unit sales globally. Ford Motor Co (F.N) last year reported revenue in Asia Pacific of $12.4 billion. Ford does not break out China revenue, but the country accounted for the majority of its sales in that region.
Trump’s steel and aluminum tariffs have added billions of dollars to the cost of assembling U.S. vehicles, and tariffs on Chinese-made parts have also hiked costs.
Motorcycle manufacturer Harley-Davidson (HOG.N) was hit by retaliatory tariffs from the European Union for the metals tariffs. The company calculates spending $100 million on tariff costs in 2019.
Motor home maker Winnebago Industries Inc (WGO.N) said it expected at least $10 million in added cost pressures in fiscal 2020 from the latest tariffs and proposed duties.
Equipment manufacturer Deere & Co (DE.N) last week trimmed its full-year earnings forecast for the second time in three months, citing the U.S.-China trade war and bad weather, and said it will cut production at its facilities in Illinois and Iowa in the second half of 2019.
Deere and rival Case New Holland CNHCN.UL have passed on higher costs from metals tariffs to customers, further lifting farm costs.
Steel and aluminum tariffs were among the first to be levied by the United States in early 2018 and included imports from almost the entire world. The move benefited U.S. steel producers, but not the manufacturers that process the metal.
The tariff burden on U.S. steel and aluminum buyers was almost $5 billion last year, according to the American Action Forum.
Reporting by Jonas Ekblom in Washington and Chris Prentice in New York; Additional reporting by Ben Klayman in Detroit and David Shepardson and Andrea Shalal in Washington; Editing by Leslie Adler