The Trump Administration is set to unveil broad tariffs on Chinese imports. But which Chinese imports will be targeted: That is a critical question as their prices are likely set to surge. Here is the answer according to Goldman.
Yesterday, in » Here Comes The Main Event: Trade War With China, And What Is Section 301 «, we wrote that Trump’s recently announced global steel and aluminum tariffs were just a (Section 232) preview of the (Section 301) main course: Trump’s imminent trade war with China, which will be unveiled any moment in the form of tariffs and restrictions on trade with China, reportedly in retaliation for Chinese IP violations.
Today, Goldman’s chief political economist Alec Philips, picks up on this and confirms that he too expects «the Trump Administration to announce tariffs on imports from China in coming weeks, as part of an intellectual property-related investigation that could also include restrictions on Chinese corporate investment in the US and restrictions on the export of intellectual property to China.»
Conveniently, we already know in rough terms what this escalation will look like: in a preview of his trade war with China, Trump in January said in a Reuters interview that “we have a very big intellectual property potential fine going, which is going to come out soon,” and more recently announced that the “U. S. is acting swiftly on Intellectual Property theft” after a series of tweets on trade policy.
And while the White House has not provided its own estimate of the cost of IP infringement, a frequently cited estimate from the Commission on the Theft of American Intellectual Property puts the annual cost to the US economy at $225bn overall. The US International Trade Commission (US ITC) placed the cost of lost sales, royalties, and licensing fees due to infringement by Chinese companies at $48bn in 2009 (or over $60bn in 2017, if held constant as a share of world GDP).
As we explained yesterday, and as Goldman reiterates, in 2017, US imports from China totaled around $500bn, so tariffs equal to the low end of the range of estimated economic damages from IP-related policies would require a 12% tariff on all imports from China, or a much higher rate on a narrower segment.
