The Trump administration followed through today on a 25-percent tax on imports of $34 billion of goods from China, including machinery and components like semiconductors. A tax on another $16 billion of goods is in the works.
China immediately retaliated with a 25-percent tariff on imports of soy beans, other agricultural products and automobiles. These moves come on top of tariffs already imposed on steel, aluminum, washing machines and solar panels.
The aggregate amount of trade affected is moderate relative to the U.S. and Chinese economies, but for the U.S., this is the most extensive import protection since the disastrous Smoot-Hawley tariffs in the 1930s. President Trump has threatened a 10-percent tax on a further $200 billion of imports from China. What is the effect on the two economies and where does this all end?
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