Trade war escalates

Trump vs. Xi – now it’s really getting tough!

Two alpha animals clash: US President Trump imposes a ten percent tariff on all products from China, while China's President Xi Jinping counters.

(Bild: AP)

Now it's getting serious in the global economic ring! US President Donald Trump and China's head of state Xi Jinping are fighting a tough duel over tariffs, countermeasures and retaliation. The fronts are hardening, the exchange of blows is escalating - and this is probably just the beginning.

At the weekend, Trump dropped the bombshell: a ten percent tariff hammer on all goods from China! The reaction from Beijing followed immediately. Xi Jinping countered with hefty import tariffs on US goods, especially on fossil fuels. It all kicks off next Monday - when the new Chinese regulation comes into force.

Now it's going to get really expensive!
No half measures: Immediately after the US tariffs came into force, the Ministry of Commerce in Beijing announced further measures on Tuesday. Coal and liquid gas from the USA? Now subject to an extra 15 percent tariff! Crude oil and certain industrial products from America? Ten percent on top!

But that's by no means all. Trump had already waved tariffs against Mexico and Canada, but immediately suspended them again for a month after the two countries made initial concessions on more border protection. But he remains tough on his biggest Asian rival. Although there could soon be a crisis phone call between him and Xi Jinping, Trump wants to push through his tough policy towards China for the time being.

The USA wants to hit China's export industry.

(Bild: tashatuvango)

What is behind this?
Franz Rößler, the Austrian economic delegate in Beijing, explains: "During the election campaign, Trump even announced 60 percent tariffs on China." These ten percent are almost harmless in comparison. But China is not willing to put up with this itself.

Rößler warns: "Beijing is building up negotiating power." One possible move: China could curb the export of rare earths - which are essential for US high-tech products. At the same time, the US is blocking the export of high-performance chips to China. A mutual economic war with an uncertain outcome!

America is blocking the export of high-performance chips, for example from Nvidia, to China.

(Bild: AFP)

Will China back down?
Trump wants the Asians to import more from the USA. But this is not so easy: Chinese products are now often of better quality and higher value than American products. Beijing could at least accommodate Trump by importing additional soy from the USA.

So far, Xi Jinping has treated America very gently and has not taken any countermeasures, even when the USA imposed 100% tariffs on electric cars. In contrast, the Chinese have responded to the EU tariffs on e-cars with counter-tariffs on meat and milk.

What does this mean for Austria?
Alarm bells are ringing here too. A survey by the Boston Consulting Group shows that Austrian companies fear the consequences of the trade war.

A quarter of top managers - all over the world, by the way - already see margins and profits at risk. A third have even drawn up contingency plans. And it could get even worse: Trump is also threatening to impose tariffs on EU products.

It remains exciting: how far will Trump and Xi take the game? And who will give in first? One thing is clear: There are no winners in this trade war - only lots of losers!