CHINA HITS BACK AT US WITH $50 BN OF RECIPROCAL TARIFFS

Beijing to levy 25% extra tax on $50 bn of US imports, including soybeans, automobiles, chemicals, aircraft

The Trump administration indicated it’s willing to negotiate with China on escalating frictions between the world’s two biggest economies, helping to ease fears among investors of a tit-for-tat trade conflict.

US Commerce Secretary Wilbur Ross said China’s response isn’t expected to disrupt the US economy. In an interview on CNBC on Wednesday, he said China’s reaction “shouldn’t surprise anyone.” He said the US isn’t entering “World War III” and left the door open for a negotiated solution.

“Even shooting wars end with negotiations,” Ross said.

Earlier on Wednesday, China said it would levy an additional 25 per cent levy on about $50 billion of US imports including soybeans, automobiles, chemicals and aircraft. The move matched the scale of proposed US tariffs announced the previous day. The US is allowing 60 days for public feedback and hasn’t specified when the tariffs would take effect, leaving a window open for talks.

US stocks opened sharply lower, but recovered as investors speculated that the flurry of tariffs may not do much damage to the global economy.

President Donald Trump also downplayed the prospect of a trade war, saying on Twitter Wednesday morning that “we are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US.”

Trump later tweeted that “when you’re already $500 Billion DOWN, you can’t lose,” in a possible reference to America’s trade deficit with China. Figures from the US Commerce Department put last year’s trade gap with the Asian nation at $337 billion. The Trump administration is urging China to lower tariffs on cars and open its market to US financial services as part of talks to resolve a rise in trade tensions, a person familiar with the matter said earlier this month.

Investors are weighing the risks of a trade war, with the Trump administration’s latest offensive based on alleged infringements of intellectual property in China. The US is targeting high-tech sectors that Beijing sees as the future for its economy. While, the China retaliation was more “belligerent” than expected, Beijing probably wants to de-escalate tensions by underscoring what’s at stake for both sides, Oxford Economics director of global macro strategy Gaurav Saroliya said in a research note. “Negotiations will probably lead to less disruptive outcomes for both sides,” Saroliya wrote.