One of the objectives of the new tariffs is to reduce the US trade deficit

One of the objectives of the new tariffs is to reduce the US trade deficit

The latest round of US tariffs on Chinese goods kicked in today (23 August) as representatives from the two countries meet in Washington for talks to bring an end to the escalating trade spat.

The Trump administration's additional 25% tax on a second wave of goods worth US$16bn came into effect this-morning, with China immediately retaliating with a 25% tax on US goods of the same value. The moves bring the amount levied to a combined $100bn since the first round of tariffs went into effect in July – $50bn from each side.

The US is trying to punish China for what it claims are unfair trade practices, such as stealing intellectual property (IP).

One of the objectives of the new tariffs is to try to reduce the US trade deficit, which stood at $568.4bn in 2017, representing 2.9% of GDP. The fact the US imports far more than it exports is viewed by some as unfair, so the idea is to try to reduce the amount the nation imports from the rest of the world, economists at The Federal Reserve Bank of New York recently pointed out.

Meanwhile, Trump has threatened further tariffs on US$200bn of Chinese goods. The tariffs, which China has vowed to retaliate against by levying duties on $60bn of US goods, could take effect by early September.

The latest actions come as Chinese and US officials meet in Washington this week for talks, which Trump has already suggested may make no difference.

He told Reuters this week he did not "anticipate much" from the discussions, which involve lower-level officials than in previous rounds. Resolving the dispute will "take time because China's done too well for too long, and they've become spoiled," he said.

The Chinese Commerce Ministry has reportedly said it will "continue to make necessary counterattacks." It added that it plans to file a complaint with the World Trade Organization (WTO).

There are fears, however, that more tariffs could cause further damage to companies and consumers.

Steve Bowen, chairman and CEO of management consultancy Maine Pointe, says the open-ended trade war has created business uncertainty, with many companies becoming increasingly concerned it could hurt their bottom lines, drive up costs, or make it difficult to operate.

While Moody's Investors Service says the threat of tariffs being imposed on all goods imported into the US from China would be a "credit negative" for the US apparel and footwear sector, leading to higher costs and gross margin pressures for up to two years until companies adjust their sourcing patterns.