- China announced that they will impose tariffs on $60 billion worth of U.S. goods just days after the U.S. announced it will impose tariffs on $200 billion worth of Chinese goods.
- After months of trade negotiations between the U.S. and China, the U.S. escalated tensions once more, claiming that China was backing out of key parts of the trade deal.
- Many experts believe the increased U.S. tariffs will hurt U.S. consumers and the economy, despite President Trump’s claims that they will only hurt China.
China Bites Back
China announced Monday that they will raise tariffs on $60 billion worth of U.S. goods, a move that came as a response to the Trump administration’s decision Friday to impose tariffs on $200 billion worth of Chinese goods.
The Trump administration’s efforts targets existing tariffs by raising taxes on those $200 billion worth of Chinese goods from 10 percent to 25 percent. Though it has not been formally announced, President Donald Trump also plans on placing new tariffs on essentially all goods imported from China, according to a statement from U.S. Trade Representative Robert Lighthizer.
“The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China,” Lighthizer’s statement said, “Which are valued at approximately $300 billion.”
China responded to this by announcing that starting June 1, they will raise their tariffs as high as 25 percent on U.S. goods that used to be taxed at 10 percent. The tariffs will apply to nearly 5,000 U.S. goods, and the steepest tariffs will apply to animal products, seasonings, live plants, a range of fruits and vegetables, and more.
While the new tariffs appear to be somewhat of a numbers game on the surface, it begs the question: What does this mean for the bigger picture?
There are two main implications here. First, what these new tariffs mean for the ongoing trade war between the U.S. and China; And second, what impact the Chinee tariffs will have on the U.S. economy and U.S. consumers.
Trade War Implications
Trump has long accused the Chinese government of hurting off U.S. consumers and businesses by stealing intellectual property from the U.S, unfairly subsidizing domestic companies, and flooding international markets with cheap goods causing U.S. companies to go out of business.
Since January 2018, the two countries have seen an ongoing cycle of the U.S. imposing tariffs on Chinese goods, and China responding by doing the same. All of this has amounted to what is essentially a tit-for-tat trade war.
However, in December, the escalation seemed to slow when the two countries agreed to negotiate a trade deal. For months, it seemed like China and the U.S. could reach an agreement. Then, despite numerous claims from Trump and his administration that the talks were going well, Trump decided to raise the tariffs last week amid highly anticipated negotiations.
Trump has argued that U.S. and Chinese negotiators failed to reach a deal during trade talks last week because China had backed out of major parts of the deal. China denied these accusations, saying they just wanted to renegotiate parts of the deal that they believe infringe on Chinese sovereignty.
Despite the recent escalation, the deal is still not off the table. Neither the U.S. tariffs nor China’s go into effect immediately. As noted above, China’s tariffs go into place on June 1, and the Trump administration structured its tariff increase so that they will not go into effect for a few more weeks, giving both sides time to negotiate.
The question that remains then is whether or not they can reach an agreement. Numerous Chinese officials have said they wish to resume trade negotiations, a point that was reiterated in the Chinese Finance Ministry’s official statement announcing their retaliatory tariffs.
“The Chinese side hopes that the US will return to the correct track of bilateral economic and trade consultations and work together with China to move toward each other and strive to reach a mutually beneficial and win-win agreement on the basis of mutual respect,” the statement said.
Trump for his part expressed his desire to negotiate a deal, but also appeared to threaten China in a series of tweets Monday, writing “China will be hurt very badly if you don’t make a deal”
Impact on the U.S. Economy
Trump also tweeted Monday morning saying that there is “no reason for the U.S. Consumer to pay the Tariffs.”
“There will be nobody left in China to do business with. Very bad for China, very good for USA! […] China should not retaliate-will only get worse!” He continued in the same thread.
That brings us to the second implication these tariffs have, which is the impact on the U.S. economy. As he said in those tweets, Trump has repeatedly argued that the tariffs will hurt China and not U.S. consumers.
In the same thread of tweets, Trump said consumers could mitigate the financial hit caused by the tariffs by buying American-made products or products manufactured in countries that are not subject to the tariffs, like Vietnam.
However, both trade experts and business groups have said Trump often is wrong in his characterization of how tariffs work. Tariffs are taxes paid by U.S. companies to buy foreign products, which means those taxes are not paid by China, but companies like manufacturing firms and other producers that need Chinese products.
When taxes are imposed, it makes Chinese products more expensive. However, it does not lower demand for those products from U.S. companies that need those Chinese goods to operate, and now have to pay more.
This specifically includes U.S. agriculture companies, which have already been hit by the new penalties, prompting a $12 billion bailout from Trump last year. Trump has said he will seek an additional $15 billion in from U.S. taxpayers to give to farmers.
All of this to say that the tariffs imposed by the U.S, can end up hurting U.S. companies and economic growth in the U.S. as well as China. This was a point that was made by Trump’s National Economic Council Director Larry Kudlow, who contradicted Trump last night in an interview with Chris Wallace, the host of Fox News Sunday.
“It’s not China that pays tariffs,” Wallace said. “It’s the American importers, the American companies that pay what, in effect, is a tax increase and oftentimes passes it on to U.S. consumers.”
“Fair enough,” Kudlow responded. “In fact, both sides will pay. Both sides will pay in these things.”
U.S. investors are also worried about the impact of the tariffs.
“The costs of U.S. tariffs have fallen entirely on U.S. businesses and households, with no clear reduction in the prices charged by Chinese exporters,” Goldman Sachs analysts wrote a note to investors on Monday. “The effects of the tariffs have spilled over noticeably to the prices charged by U.S. producers competing with tariff-affected goods.”
Investors clearly responded Monday when U.S. stocks fell by triple digits. The S&P 500 and the Dow saw their worst day since Jan. 3, while the Nasdaq had its biggest drop this year. Stocks closed with major market averages falling by over two percent.
See what others are saying: (The Washington Post) (The Wall Street Journal) (Fox Business)
Egypt Seizes Ship That Blocked Suez Canal Until Owners Pay Nearly $1 Billion
- Egyptian authorities seized the Ever Given, a mega-ship that blocked the Suez Canal for nearly a week last month, after a judge ruled Wednesday that the owners must pay $900 million in damages.
- The ship was seized just as it was deemed fit to return to sea after undergoing repairs in the Great Bitter Lake, which sits in the middle of the Suez Canal.
- The vessel’s owners said little about the verdict, but insurance companies covering the ship pushed back against the $900 million price tag, saying it’s far too much for any damage the ship actually caused.
Ever Given Still in Egypt
An Egyptian court blocked the mega-ship known as the Ever Given from leaving the country Wednesday morning unless its owner pays nearly $1 billion in compensation for damages it caused after blocking the Suez Canal for nearly a week last month.
The Ever Given’s ordeal started when it slammed into the side of the canal and became lodged, which caused billions of dollars worth of goods to be held up on both sides of the canal while crews worked round the clock to free the vessel. An Egyptian judge found that the Ever Given becoming stuck caused not only physical damage to the canal that needed to be paid for but also “reputational” damage to Egypt and the Suez Canal Authority.
The ship’s Japanese owner, Shoei Kisen Kaisha, will need to pay $900 million to free the ship and the cargo it held, both of which were seized by authorities after the ship was transported to the Great Bitter Lake in the middle of the canal to undergo now-finished repairs. Shoei Kisen Kaisha doesn’t seem to want to fight the judgment in court just yet. It released a short statement after the ruling, saying that lawyers and insurance companies were working on the claims but refused to comment further.
Pushing Back Against The Claim
While Shoei Kisen Kaisha put in a claim with insurers, those insurance companies aren’t keen on just paying the bill. One of the ship’s insurers, UKP&I, challenged the basis of the $900 million claim, writing in a press release, “The [Suez Canal Authority] has not provided a detailed justification for this extraordinarily large claim, which includes a $300 million claim for a ‘salvage bonus’ and a $300 million claim for ‘loss of reputation.’”
“The grounding resulted in no pollution and no reported injuries. The vessel was re-floated after six days and the Suez Canal promptly resumed their commercial operations.”
It went on to add that the $900 million verdict doesn’t even include payments to the crews that worked to free the ship, meaning that the total price tag of the event could likely be far more for Shoei Kisen Kaisha and the multiple insurance companies it works with.
See what others are saying: (Financial Times) (CNN) (The Telegraph)
Treated Radioactive Water From Japanese Nuclear Power Plant Will Be Released Into Ocean
- The Japanese government confirmed Tuesday that it will officially move forward with plans to dump millions of gallons of radioactive water from the Fukushima nuclear power plant into the ocean.
- The government spent a decade decontaminating the water, only leaving a naturally occurring isotope in it that scientists recognize as safe for people and the environment.
- Despite the safety claims, protesters took to the streets in Tokyo to show disapproval of the decision. Local business owners, in particular, have expressed fears that more municipalities worldwide could ban Fukushima products, including fish, because of distrust in the water.
- Meanwhile, officials have insisted that the dump is necessary as the water takes up a massive amount of space, which is needed to store highly radioactive fuel rods from the remaining cores at the now-defunct nuclear facility.
Editor’s Note: The Japanese government has asked Western outlets to adhere to Japanese naming conventions. To that end, Japanese names will be written as Family Name followed by Given Name.
Radioactive or Bad Publicity?
After years of discussions and debate, the Japanese government announced Tuesday that it will dump radioactive water from the Fukushima nuclear power plant into the ocean.
Government officials consider the move necessary, but it’s facing backlash from local businesses, particularly fisheries, over potential consequences it could have. Many are especially concerned that the decision will create bad press for the region as headlines about it emerge. For instance, a headline from the Guardian on the issue reads, “Japan announces it will dump contaminated water into sea.”
While the water is contaminated and radioactive, it’s not nearly what the headlines make it out to be. The government has spent the last decade decontaminating it, and now it only contains a trace amount of the isotope tritium. That isotope is common in nature and is already found in trace amounts in groundwater throughout the world. Its radiation is so weak that it can’t pierce human skin, meaning one could only possibly get sick by ingesting more than that has ever been recorded.
According to the government, the decontaminated water at Fukushima will be diluted to 1/7 of the WHO’s acceptable radiation levels for drinking water before being released into the ocean over two years.
Something Had To Eventually Be Done
Over the last decade, Japan has proposed this plan and other similar ones, such as evaporating the water, which the International Atomic Energy Agency said last year met global standards.
The water has been sitting in containers for years, so why is there a push to remove it now? Space and leakage seem to be the primary reasons.
The water containers are slowly being filled by groundwater, and the government expects to run out of space relatively soon. Space is sorely needed, as Prime Minister Suga Yoshihide has pointed out in the past that the government wants to use the space to store damaged radioactive fuel rods that still need to be extracted from the plant. Unlike the water, those rods are dangerously radioactive and need proper storage.
Regardless, Suga reportedly recognizes that removing the water is going to end up as a lose-lose situation.
“It is inevitable that there would be reputational damage regardless of how the water will be disposed of, whether into the sea or into the air,” he said at a press conference last week. As expected, the government’s decision did trigger backlash, prompting many demonstrators to take to the streets of Tokyo Tuesday in protest.
To this day, eleven countries and regions still ban many products from the Fukushima prefecture despite massive clean-up efforts that have seen people returning to the area to live.
Greta Thunberg To Skip U.N. Climate Change Conference, Citing Vaccine Inequality
- Young environmental activist Greta Thunberg will not attend the U.N.’s climate change conference set to take place in Glasgow, Scotland this November.
- “Inequality and climate injustice is already the heart of the climate crisis. If people can’t be vaccinated and travel to be represented equally that’s undemocratic and would worsen the problem,” the 18-year-old tweeted Friday, adding, “Vaccine nationalism won’t solve the pandemic. Global problems need global solutions.”
- Since rollouts began late last year, 40% of vaccines have been administered in wealthy and Western countries, according to The Washington Post.
- Scientists have warned that the longer the virus continues to circulate widely, the more chances it will have to change and potentially develop vaccine resistance.
Thunberg Points To Vaccine Inequality
Swedish climate activist Greta Thunberg has said she is skipping the UN’s climate change conference.
The COP26 summit is set to take place in Glasgow, Scotland in November, but 18-year-old Thunberg told BBC she won’t attend because she’s concerned about the impact COVID-19 will have on attendance.
In a Twitter thread Friday, she responded to a headline about her plans to miss the summit.
“Of course I would love to attend…But not unless everyone can take part on the same terms. Right now many countries are vaccinating healthy young people, often at the expense of risk groups and front line workers (mainly from global south, as usual…),” she wrote.
“Inequality and climate injustice is already the heart of the climate crisis. If people can’t be vaccinated and travel to be represented equally that’s undemocratic and would worsen the problem.”
“Vaccine nationalism won’t solve the pandemic. Global problems need global solutions,” the teen continued.
Thunberg went on to say that if the summit is delayed, it doesn’t mean urgent action should too.
“We don’t have to wait for conferences nor anyone or anything else to dramatically start reducing our emissions. Solidarity and action can start today,” she added before noting that digital alternatives for the conference would also be insufficient.
“High speed internet connection and access to computers is extremely unequal in the world. In that case we would lack representation from those whose voices need to be heard the most when it comes to the climate crisis,” she wrote.
Data on Global Vaccine Distribution Efforts
According to The Washington Post, nearly 20% of people in the United States are now vaccinated, but many other countries are unlikely to hit that same metric by the end of the year, even with international assistance through the Covax program.
Current projections predict it could be years before developing countries distribute enough doses to come close to herd immunity, which scientists say requires inoculating around 70-80% of a population.
Since rollouts began late last year, enough shots have been distributed to fully vaccinate about 5% of the world’s population, but The Post reported that the vast majority have been administered in wealthy and Western countries.
Around 40% of vaccines have been given in 27 wealthy nations that include only 11% of the world’s population, according to the Bloomberg Vaccine Tracker.
That’s pretty concerning because scientists also warn that the longer the virus continues to circulate widely, the more chances it will have to change and potentially develop vaccine resistance.
Thunberg’s comments are a blow for U.K. organizers, who have already postponed the conference once from last November because of the pandemic. Even now, there has been speculation that it could be delayed again this year.
Thunberg would not play a formal role at the conference but her decision not to attend is a significant symbolic moment.
At COP25, the young climate change activist gave a headline speech and she typically attends major climate events of this nature. On top of that, reports say this summit was slated to be one of the most consequential climate conferences since the 2015 Paris accord.
On the agenda for this year’s conference discussions were country-level plans for cutting carbon emissions, along with progress on the Paris agreement and the U.N. Framework Convention on Climate Change.