China vows retaliation for latest $200bn USA tariff threat

Elias Hubbard
July 12, 2018

Earlier on Tuesday, the Trump administration unveiled a list of Chinese exports, worth some $200 billion, that it plans to slap with 10 percent tariffs.

The goal is to bring the total amount of Chinese imports up to 40 percent of the total imported from the Asian power, since the USA products hit by Beijing's retaliation represent that share of exports, an official told reporters in a conference call.

The U.S. government said the new tariffs are in response to Beijing's June 15 tariffs on $50 billion in U.S. exports, which were themselves in retaliation for President Trump's initial tariffs against China. It's unclear what that action could include.

Last year, China only imported about $130 billion of US goods, so to retaliate it might increase the size of the tariffs it imposes or resort to what it calls "qualitative" measures, which USA businesses fear could mean reprisals against their China operations.

Trump has recently introduced tariffs on $34 billion worth of Chinese products and, while hundreds of products have been affected, certain goods were conveniently spared from this enactment - including the products made for Ivanka's internationally manufactured fashion brand. "Imposing taxes on another $200 billion worth of products will raise the costs of everyday goods for American families".

Beijing has said it would hit back against Washington's escalating tariff measures, including through "qualitative measures", a threat that USA businesses in China fear could mean anything from stepped-up inspections to delays in investment approvals and even consumer boycotts.

The tariffs will not be imposed until after a two-month period of public comment on the proposed list.

In his statement, Lighthizer claimed that the United States has specially targeted those Chinese products that "benefit from China's industrial policy and forced technology transfer practices", and China's retaliation - from Washington's perspective - was "without any worldwide legal basis or justification".

Lighthizer said the initial $50 billion in USA tariffs were aimed at goods that "benefit from China's industrial policy and forced technology transfer practices".

In financial markets, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.5 per cent, while the main indexes in Hong Kong and Shanghai fell more than 2 per cent.

The National Association of Manufacturers also criticized the US decision, saying this latest round of tariffs could undermine the economic gains from the administration's tax and regulatory reform policies.

If the United States were to impose tariffs on oil, US oil sellers would have to look for other destinations and attract new customers, which could cost them more.

"Tonight's announcement appears reckless and is not a targeted approach", said Senate Finance Chairman Orrin Hatch in a statement.

In Beijing, Li Chenggang, assistant minister at China's Commerce Ministry, said that the latest U.S. proposals would hurt both countries and pointed to declines in Chinese export growth and overseas investment to the United States in the first half of this year.

"Unfortunately, China has not changed its behavior - behavior that puts the future of the US economy at risk".

Louis Kuijs, Hong Kong-based Head of Asia Economics at Oxford Economics, said while he expects China to strongly condemn the US moves, its policy response is likely to be limited for now. "Tariffs threaten to boomerang on the very workers they're supposed to help, and will only further undermine the confidence manufacturers need to make investments in new equipment, facilities and people".

The earliest they would come into effect is September.

South Korea's government has weighed in this morning, warning that its exports could be hurt by the escalating dispute between Washington and Beijing.

As its dispute with Washington deepened, Beijing has been calling on other countries to support global free trade and has talked up efforts to ease investment rules.

China's government has criticized the latest USA threat of a tariff hike as "totally unacceptable" and vowed to retaliate in their escalating trade war.

Other reports by Click Lancashire

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