European companies that export from China are changing the global flow of their goods to avoid paying higher American tariffs. Tariff hikes are hurting companies that rely on a free flow of trade, said Mats Harborn of the European Union Chamber of Commerce in China. So companies are scrambling to adjust their supply chains to keep U.S.-bound goods from passing through China. The Trump administration’s tariff hike on medical equipment, electronics and other goods from China apply to exports made by U.S. or European companies as well as by Chinese suppliers.
At the same time, BMW Group and the biggest Chinese SUV brand, Great Wall Motor, have announced a partnership to produce electric MINI vehicles in China. It’s a sign that global automakers are increasing development under pressure from Beijing. BMW and Great Wall said their venture will also make electrics for the Chinese partner’s brand. Automakers are pouring billions of dollars into creating electric models for China, the biggest market for the technology.
President Donald Trump has warned that the U.S. is ready to target an additional $200 billion in Chinese imports – and then $300 billion more – if Beijing refuses to yield to U.S. demands and continues to retaliate. If his administration went ahead with that threat, it would raise the total of targeted Chinese goods to potentially $550 billion – more than the $506 billion that China actually shipped to the United States last year.
Even if the Trump administration doesn’t follow through on that threat, more individuals could be affected over time by the tariffs that kicked in last week. Some American companies that rely on Chinese-made machinery or parts, for example, will eventually have to pass along at least some of their higher costs to customers. Others will likely decide to hold back on hiring.
Washington imposed 25 percent tariffs on $34 billion of goods in response to complaints that Beijing is hurting American companies by stealing or pressuring enterprises to hand over technology. The U.S. trade war with China is the most consequential trade conflict the Trump administration has provoked. But it’s hardly the only one. It has also applied tariffs on imported steel and aluminum from allies like Canada, Mexico and the European Union. The 28-country EU bloc has responded with import taxes on $3.25 billion of U.S. goods. In the meantime, the Trump administration has threatened to abandon the North American Free Trade Agreement with Canada and Mexico. Trump has also spoken about slapping tariffs on imported cars, trucks and auto parts, which General Motors has warned could hurt the U.S. auto industry and drive up car prices.