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Stock market sags as Trump fires first shot in a new trade war with China

By Masao Suzuki |
March 23, 2018
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San José, CA - On March 22, the U.S. stock market staggered with the Dow Jones Industrial Average falling more than 700 points or almost 3%. That day, President Trump had fired an opening salvo of trade restrictions aimed at China by announcing steep tariffs on $60 billion of imports from China. He promised that this was just the first of many restrictions on Chinese goods in what could be a new trade war with China.

The U.S. has a large trade deficit with China, importing almost $400 billion more goods and services from China than China buys from the U.S. But much of this trade deficit is ‘Made in the U.S.A.’ as U.S. corporations such as Apple have offshored their production to developing countries such as China to maximize their profits.

China’s response was relatively mild, promising to fight back by putting restrictions on U.S. agricultural exports such as fruit, nuts, wine and pork. China is also major importer of U.S. soybeans, as well as commercial jetliners made by Boeing. China also called for negotiations with the U.S. over trade issues.

Trump’s announcement of new tariffs on Chinese goods follows his announcement of tariffs on imported steel and aluminum. The Trump administration claimed that these tariffs were imposed “national security” grounds, even though the single largest source of imported steel is Canada. Even if the U.S. were to make more aluminum domestically and import less, 99% of bauxite (aluminum ore) used to make aluminum is imported by the U.S.

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