Dive Brief:
- In direct response to U.S. tariffs on steel and aluminum, India last week said it would place tariffs on 30 U.S. product lines — from apples to chemical products — worth $241 million.
- The news follows a World Trade Organization dispute filed by India — and joined by Russia, the European Union, Hong Kong, China and Thailand — requesting consultations with the U.S. over the new measures. At the time of filing, India said it would impose countervailing measures that enter effect June 21, CNN reports.
- In separate news, China announced Friday it would impose a 25% tariff on 545 U.S. products worth $34 billion, a reciprocal response to the U.S. action against 818 Chinese products announced that same day.
Dive Insight:
The fallout from the United States' shifting stance on trade is just beginning, but so far the target is clear: foreign tariffs on the U.S. are meant to either cancel the benefits of a protectionist stance or strategically harm industries vital to President Donald Trump's coalition.
Mexico, the EU and Canada, for example, responded in kind to the U.S. steel and aluminum tariffs by taxing the same products, and associated parts, in return. China only took hours to announce it would retaliate with tariffs on $34 billion worth of products — the same value of Chinese goods taxed by the U.S.
The in-kind responses are meant to cancel out the benefits the U.S. seeks to gain from the tariffs, both at the macro- and microeconomic level.
Reciprocal tariffs on steel will drive up the price of U.S. metal exports abroad, so while new producers will benefit from a lower domestic price, they cannot threaten international competitors. Meanwhile, a sweeping list like China's aims to punish the general economy, thereby nullifying the domestic economic gains.
The effects of tariff are not quite that simple, but the message is clear: trading partners will not stand idly by as the U.S. taxes their economies.
One certain effect, however, is supply chains will suffer in the short-term as they reorganize to adapt to new trade and production flows. At least in the U.S.
"U.S. tariffs hit supply chains, multinational supply chains, with its list," Mary Lovely, senior fellow at Peterson Institute and an economics professor at Syracuse University Maxwell School said on Bloomberg this morning.
"China is signaling very strongly that it is not going to hit multinational supply chains, that it's still open for business, that it's still going to be a great place to put part of supply chains," she added, noting it is instead attempting to inflict pain in the U.S.
