Trade war

US President Donald Trump on Friday ignited his trade war with China, slapping tariffs on tens of billions in Chinese imports and sparking immediate retaliation from Beijing.

The moves brought the world’s two largest economies to the verge of an all-out confrontation long feared by markets and industry.

And the China trade offensive is only one side of Trump’s multi-front battle with all major US economic partners.

The announcement caps months of sometimes fraught shuttle diplomacy in which Chinese offers to purchase more American goods failed to assuage Trump’s grievances over the soaring trade imbalance and Beijing’s aggressive industrial development policies.

And as Trump warned of “additional tariffs” should Beijing hit back with tit-for-tat duties on American goods, China unveiled 25 percent duties on $50 billion in US imports.

“The United States can no longer tolerate losing our technology and intellectual property through unfair economic practices,” Trump said.

“These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs.”

But at least initially, Trump’s new China tariffs will not cover the full $50 billion that Trump announced Friday.

US Trade Representative Robert Lighthizer said the punitive duties will apply on 818 Chinese products valued at $34 billion starting July 6, with a second list of $16 billion to be considered under a new review process — bringing the total possible affected import volume to $50 billion.

But it is likely companies will seek more exemptions so the final total could fall short of that amount.

Beijing’s countermeasures closely mirrored Washington’s, with 545 American exports, also valued at $34 billion, facing punitive duties as of July 6, including agricultural products and vehicles, according to the official Xinhua news agency.

The State Council said another 114 items will be subject to tariffs at a later date, according to Xinhua.

US farmers are especially concerned about the impact of a trade war, since they are sure to feel the hit.

China’s Ministry of Commerce said the decision to impose tariffs meant “all previously agreed trade negotiation results are no longer valid.”

“It is deeply regrettable that in disregard of the consensus between the two sides, the US has demonstrated flip-flops and ignited a trade war,” the ministry said.

It also called on other countries to “take collective action” against this “outdated and backwards behavior.”

But the White House maintains that any Chinese countermeasures would be unjust and could be met with further US sanctions.

“We have taken essentially a defensive action,” a senior US official told reporters, adding that “further threats that are going to hurt other industries… would be a mistake.”

The official, who asked not to be identified, declined to say whether Trump would make good on a March threat to hit another $100 billion in Chinese goods with tariffs in response to Beijing’s retaliation.

China in April already put punitive duties on 128 US goods, including pork, wine and certain pipes in response to global US tariffs on steel and aluminum imposed by Trump the month before.

The US president outraged Canadian, Mexican and European leaders last month by imposing the steel and aluminum tariffs to protect American producers from allegedly unfair competition.

Brussels, Ottawa, Beijing and Mexico City already have shown they intend to inflict damage on export industries in politically-sensitive voting districts — something which could prove damaging to Republicans already facing a loss of power in November’s mid-term elections.

Tit-for-tat tariffs on products worth tens of billions have left the US and China teetering on the brink of an all-out trade war, one Beijing can ill-afford with headwinds mounting for its economy.

US President Donald Trump announced tariffs Friday on Chinese imports valued at $34 billion — with another $16 billion under consideration — prompting an immediate response from Beijing on American products worth the same amount.

The confrontation between the world’s two largest economies comes just as signs emerge that Beijing’s drive to cut domestic debt is taking a toll on China’s economic growth.

Economic data this week showed investment, a pillar of China’s economy, sagging, while surging exports — threatened by the US trade spat — have provided a boost in recent months.

China’s commerce ministry warned Trump’s tariffs “threaten China’s economic interests and security”, in a statement outlining Beijing’s response.

Washington is bent on violating global trade norms, it said, and “seriously violates China’s rights and interests under World Trade Organization rules”.

Trump has threatened further tariffs if Beijing retaliates, having previously said imports worth another $100 billion could be targeted.

“The trade dispute is escalating at a time when doubts about the domestic economic picture are rising,” said Mark Williams, Asia Economist at Capital Economics, in a note.

Two decades ago, China’s economy was largely fuelled by exports, but it has made progress in rebalancing towards domestic investment and consumption since the global financial crisis erupted last decade — limiting the damage trade tariffs could inflict on Beijing.

Still, strong exports this year have lifted the economy, which is now showing signs of losing steam under the weight of Beijing’s war on debt, launched to clean up financial risks and rein in borrowing-fuelled growth.

The commerce ministry issued two lists of American goods — worth $50 billion in total — which will be hit with a retaliatory 25 percent tariff.

Initially, 545 US products valued at $34 billion will be targeted, mimicking the tariff rollout by the Trump administration.

These include major American exports to China like soybeans, which brought in $14 billion in sales last year, and are grown in states that supported Trump during the 2016 presidential election.

Politically important exports like other agricultural products and automobiles also made the list.

“If a trade war between the two becomes fierce, the result will not provide a favourable political environment for President Trump,” China’s nationalist tabloid Global Times warned in a Saturday editorial.

Beijing also drew up a second list of $16 billion in chemical and energy products to hit with new tariffs, though it did not announce a date for imposing them.

The $100 billion worth of targeted goods altogether represent a significant portion of the $636-billion two-way trade last year.

“There will be an impact on growth, in China, the US and elsewhere,” said Louis Kuijs, head of Asia Economics at Oxford Economics, in a research note.

“Increased uncertainty and risks will weigh on business confidence and investment, especially cross-border investment.”

Slowing credit growth has translated into lower investment, analysts say, as Chinese factories and workshops let up from their frenetic pace in May and retail sales slowed.

Fixed-asset investment during the first five months of the year flagged to its slowest pace since 1999 when data collection began, according to Bloomberg News.

Beijing’s ambitious industrial policies and state intervention, which causes much of the frustration in Washington, is holding China back, according to Capital Economics’ Williams.

“Policymakers’ reluctance to allow market forces to determine economic outcomes is eroding the advantages that have kept China an economic outperformer for so long,” he said.

“China’s average growth over the coming decade is likely to be much weaker as a result.” AFP

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