WASHINGTON – Every Minnesota business that sells anything to China moved closer to feeling the sting of the trade war Friday as China named 5,207 U.S. product categories worth $60 billion that soon could be subject to import tariffs of up to 25 percent.
The Chinese were reacting to new threats from President Donald Trump to not only place tariffs on $200 billion worth of Chinese imports but also to raise the rate on those tariffs from 10 percent to 25 percent.
With the stakes rising, China is running out of U.S. imports to tax because it sells so much more to Americans than it buys from them. In 2017, the Chinese sold $506 billion worth of products in the United States and imported just $130 billion in U.S. products.
The enormous U.S. trade deficit with China, as well as China’s theft of U.S. intellectual property and unfair restrictions on U.S. companies wanting to do business in China, spawned the Trump tariffs. The White House believes the threat of tariffs can extract concessions from the world’s second-largest economy that will make it play fairer with the United States.
Friday’s list of U.S. products that might be taxed by China showed the Asian giant is not yet ready to budge. Its new prospective tariff targets ranged from ingots made from Minnesota iron to sausages stuffed with Minnesota pork.
Cereal products such as those produced by General Mills and boots and “sports footwear” such as those made by Red Wing Shoes are also on the list. Wooden and metal doors and windows such as those made by Minnesota-based Andersen Corp. are there, too, along with electrical equipment, X-ray equipment, pumps and paper, all of which might be Minnesota-made.
That comes on top of China’s plan to tax U.S. soybeans. China is a major market for Minnesota soybean farmers.
Even as China runs out of U.S. imports to tax, it maintains some leverage, said Karen Donohue, who teaches about business supply chains and operations at the University of Minnesota’s Carlson School of Management.
“China can’t put tariffs on $200 billion worth of products,” she said. “But it can delay licenses [for U.S. companies wanting to do business]. It can increase inspections [of U.S. products].”
The Chinese also can introduce another element into the fight, said U international trade professor Robert Kudrle: nationalism.
“The Chinese are a very patriotic people,” he explained. “A lot of people are concerned that if the Chinese government suggests that purchase of U.S. products is not in the national interest, it could cut down on sales of U.S. products beyond the barriers created by tariffs.”
As the trade war heats up instead of winding down, each shot holds more potential for economic injury to Minnesota businesses, Kudrle said.
“We sell a number of things to China, including raw materials and agriculture,” he noted. “That clearly hurts us on the production side. Then we’re hurt on prices by our own tariffs on Chinese imports. In the short run, it is enormously disruptive.”