China's tit-for-tat on trade could wipe out Wall Street gains for the year
President Donald Trump is opening a Pandora’s box of economic consequences that could reverberate around the world, economists warned, as trade tensions with ChinaChina’s announcement Monday morning to levy tariffs on $60 billion of U.S. imports is likely just the opening salvo, said Jacob Kirkegaard, a senior fellow at the Peterson Institute of International Economics. “It’s clear that retaliation is coming," he told NBC News.
Although Trump warned China against it, the prospect of retaliation from Beijing was a foregone conclusion, said Peter Petri, a professor of international finance at Brandeis University. “It is retaliation, but it’s quite contained and concentrated,” said Ludovic Subran, chief economist at Euler Hermes and global head of macroeconomic research for Allianz. “It’s yet again a wake-up call for the trade commissioner in the U.S. to really engage with them.”
So far, the impact of China tariffs on the American economy has been muted; companies have absorbed most of the costs and largely eaten the margin cost, but that won't be sustainable at the wider and steeper tariff levels sought by Trump, economists say. The trade deficit means that Trump’s threat to levy tariffs on the entirety of Chinese imports to the United States gives Beijing a disadvantage in terms of tit-for-tat retaliation.
China also grasps the political value this has to Trump, and will coordinate its countermeasures accordingly, Kirkegaard said. “They’re going to continue to target sectors and industries that are located in Trump areas, swing states. They want to impose as much economic damage on the people that support Donald Trump as they can,” he said.
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