April 5, 2018

China retaliates with 25% tariffs on 106 US imports amid looming trade war
 

 

On April 4, China announced it will impose additional tariffs of 25% on US$50 billion worth of key US imports including soybeans, planes, cars, whiskey and chemicals, in a significant escalation in trade tensions between the two countries.

 

Moving with unusual speed, Chinese officials outlined plans to make it more costly to import 106 categories of American goods into China. The move came just hours after the Trump administration detailed its plan to impose tariffs on a similar value of Chinese-made aircraft parts, cars and car parts, televisions, steel and much more.

 

"China has never succumbed to external pressure," Zhu Guangyao, vice minister of finance, said at a news briefing.

 

He added: "External pressure will only make the Chinese people more focused on economic development."

 

The effective date of the Chinese tariffs depends on when the US action takes effect.

 

Unlike Washington's list, which was filled with many obscure industrial items, China's list strikes at signature US exports, including soybeans, frozen beef, cotton and other key agricultural commodities produced in states from Iowa to Texas that voted for Donald Trump in the 2016 presidential election.

 

"This is a real game changer and moves the trade dispute away from symbolism to measures which would really hurt US agricultural exports," said Commerzbank commodities analyst Carsten Fritsch.

 

The speed with which the trade struggle between Washington and Beijing is ratcheting up - the Chinese government took less than 11 hours to respond with its own measures - led to a sharp selloff in global stock markets and commodities.

 

Investors are wondering whether one of the worst trade disputes in many years could now turn into a full-scale trade war between the world's two economic superpowers.

 

"The assumption was China would not respond too aggressively and avoid escalating tensions. China's response is a surprise for some people," said Julian Evans-Pritchard, senior China economist at Capital Economics, noting that neither said had yet called for enforcement of the tariffs.

 

"It's more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force," he said.

 

Chinese retaliation for the Trump administration's latest move had been widely expected. Beijing typically responds to overseas tariffs with similar ones of its own, and Chinese officials had promised a proportional response if the Trump administration went ahead this week with the next step toward broad tariffs on Chinese goods.

 

But in the past, China has tended to wait days and sometimes weeks before striking back.

 

The tit-for-tat tariffs are part of a wider clash looming over trade between the two countries. Stock markets around the world have taken a hit in recent weeks as Washington and Beijing have escalated their trade dispute.

 

Chinese officials said that they saw room to negotiate.

 

"China's attitude is clear," Mr Zhu said. "We don't want a trade war because a trade war would hurt the interests of both countries."

 

"So far, this is only a catalogue [of tariffs] that is not yet in effect. We are only putting everything on the table and it is time for negotiation and co-operation," added Wang Shouwen, vice-minister of commerce, at a press briefing.

 

"China does not want a trade war because no one will emerge as a winner in a trade war," he said. "But if someone insists on fighting a trade war, we will be there."

 

Wang emphasised that the Trump administration's demand that China cuts its trade surplus with the US by US$100 billion was "impossible", saying that Beijing could not "artificially intervene in the amount of deficit."

 

Two separate rounds of tariffs are now playing out between the US and China, one involving metals and the other involving advanced manufacturing technologies.

 

Citing a need to protect domestic suppliers for national security reasons, the US on March 23 imposed tariffs on US$20 billion a year worth of steel and aluminum imports from around the world, including almost US$3 billion a year from China. Beijing retaliated by imposing tariffs on nearly US$3 billion a year of American pork, wine, stainless steel pipes and other goods.

 

The US list covers 1,300 items, including high-definition colour video monitors, electromagnets used in MRI machines, aerospace products, and machinery used to make processed textiles, printed products and food.

 

Beijing had said earlier that it "strongly condemns and firmly opposes" the tariffs.

 

"Such unilateralistic and protectionist action has gravely violated fundamental principles and values of the WTO [World Trade Organisation]," the Chinese embassy in Washington said in a statement.

 

China said the US action did not serve either country's interests and "even less the interest of the global economy".

 

The dueling tariffs are relatively modest in the context of a trade relationship valued at nearly US$650 billion a year.

 

Still, economists worry that the clash could escalate quickly if the two sides can't find a way to resolve their differences, threatening a commercial relationship that is essential to the world economy.

 

Chinese experts said that a pivotal moment had arrived in Sino-American trade relations, with each side poised to impose heavy tariffs in the coming months on industries that are important to the other.

 

- Today/AGENCIES