President Trump announced last Thursday that the United States would impose a new 10% tariff on $300 billion worth of products imported from China, saying Beijing had broken some of the promises it made in trade negotiations concerning larger purchases of US agricultural products.
The new tariffs, which are set to take effect Sept. 1, represent another ratcheting up in trade tensions between the countries and sent stocks falling sharply.
Major U.S. stock indexes fell about 1%, and oil prices tumbled about 8% after Trump's announcement on concerns that the tariffs would hurt demand.
The threat marks the biggest escalation so far taken by the Trump administration and brings a surprise end to a truce that had been in place since the president met Xi Jinping, his Chinese counterpart, in Osaka at the end of June.
But on many key issues, namely core technology, the U.S. is as indispensable as China is in its role as the world's assembly line. The trade war threatens to undercut the U.S. position, chip away at its dominance.
China plays the starring role in the erosion of U.S. market share in mainland China and throughout Asia. But European and Japanese companies should not be discounted. There is more disdain in Europe for companies like Google and Facebook than there is for Huawei and Alibaba. The trade war only exacerbates that disdain.
An important point to be considered is the possibility to avoid the trade war thanks to a third-party country. An example could be Vietnam, playing the role of a central node in the middle of the two fighting Economies. The South-Eastern country would be exploited as a production pivot to get away with the raising taxes.