TRADE WAR ESCALATES

China vows retaliation after US hikes levies to 25pc for US$200b worth of goods

THE United States escalated a tariff war with China yesterday by hiking levies to 25 per cent for US$200 billion (RM830 billion) worth of Chinese goods in the midst of last-ditch talks to rescue a trade deal.

But even as Beijing threatened retaliation, negotiators in Washington agreed to stay at the table for a second day, keeping alive hopes of an eventual agreement.

US President Donald Trump, who has adopted protectionist policies as part of his “America First” agenda, issued orders for the tariff increase, saying China had “broke the deal” by reneging on commitments made during

months of negotiations.

Trump also said he would start the “paperwork” for 25 per cent duties on another US$325 billion in Chinese imports.

In Beijing, the Commerce Ministry said it “deeply regrets” the US decision, adding that it would take necessary countermeasures.

Chinese Vice-Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin talked for 90 minutes on Thursday and were expected to resume efforts yesterday.

The Commerce Ministry said negotiations were continuing, and that it “hopes the United States can meet China halfway, make joint efforts, and resolve the issue through cooperation and consultation”.

With negotiations in progress and no action from the Trump administration to reverse the increase, US Customs and Border Protection imposed the new 25 per cent duty on more than 5,700 categories of products leaving China after 12.01am yesterday.

The Office of the US Trade Representative separately said seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrived prior to June 1. Those cargoes will be charged the original 10 per cent rate.

The grace period was not applied to three previous rounds of tariffs imposed last year on Chinese goods, which had much longer notice periods of at least three weeks before the duties took effect.

Trump gave US importers less than five days notice about his decision to increase the rate on the US$200 billion category of goods to 25 per cent, which now matches the rate on a prior US$50 billion category of Chinese machinery and technology goods.

“I think the Chinese in the end will want to keep negotiations going. The question is: where do they go for retaliation?” said James Green, a senior adviser at McLarty Associates who until August was the top USTR official at the embassy in Beijing.

Green expected China to increase non-tariff barriers on US companies, such as delaying regulatory approvals, as it couldn’t hit the same amount of imported US goods with higher tariffs.

The biggest Chinese import sector affected by the latest tariff hike is a US$20 billion-plus category of Internet modems, routers and other data transmission devices, followed by about US$12 billion worth of printed circuit boards used in a vast array of US-made products.