China warns of retaliation

WASHINGTON — China announced Thursday that it would take “necessary countermeasures” if President Donald Trump moves forward with tariffs set to take effect Sept. 1, continuing the back-andforth escalation of the trade war even as the conflict elevates fear of a global economic slowdown.

Earlier this week, in a rare moment of easing, Trump announced that tariffs on certain consumer goods would be postponed until mid-December to spare consumers and companies some of the added costs during the Christmas shopping season.

It marked Trump’s first public acknowledgment that Americans shoulder the burden from his tariffs, but Trump tweeted that the move “actually helps China more than us,” and he said China would reciprocate.

But the Chinese response Thursday showed that Beijing was not appeased by the delay.

“The move by the U.S. seriously violated the consensus reached between the two heads of state in Argentina and Osaka, and deviates from the right track of resolving differences through consultation,” the Customs Tariff Commission of the State Council said in a statement. “China will have to take necessary countermeasures.”

Less than 12 hours before the Chinese statement, Trump appeared to float the

possibility of another meeting with Chinese President Xi Jinping, whom he met with in December in Buenos Aires and in June in Osaka, Japan.

Trump told reporters in Morristown, N.J., that he has a call scheduled “very soon” with Xi over trade. “They would like to do something,” Trump said, without elaborating.

The mounting tension between the U.S. and China has unnerved financial markets that worry that the global economy will tip into recession. Trump says he plans to impose 10% duties on an additional $300 billion of Chinese imports, extending penalties to almost everything the United States buys from China.

The Chinese announcement made no mention of Trump’s decision Wednesday to postpone penalties on about 60% of those goods until Dec. 15. Among the products given a reprieve are mobile phones, laptops, video game consoles, some toys, computer monitors, shoes and clothing.

“Every time investors find the strength to pick themselves up off the floor, the trade war delivers another blow and knocks them down again,” Craig Erlam, an analyst with foreign-exchange broker Oanda, wrote in a note to investors Thursday. “This report also answers the question of whether China viewed the decision to delay half of the tariff hikes until mid-December as being conciliatory in any way or just an act of self-preservation, given the importance of the holiday season in the U.S.”

Chinese officials offered no further details as to what form countermeasures might take or whether their trade negotiators would still be coming to the U.S. to continue talks in September. But the message shows that China is prepared to dig its heels in, even as it grapples with political protests in Hong Kong and a raft of disappointing economic data. Earlier this week, China reported levels of high unemployment, as factory output fell to a 17-year low, showing the breadth of the nation’s economic slowdown.

In the United States, similar omens are looming. For the first time since the run-up to the last recession, the yields — or returns — on short-term U.S. bonds eclipsed those of long-term bonds. This phenomenon, which suggests investor faith in the economy is faltering, has preceded every recession in the past 50 years.

“The stars are aligned across the curve that the economy is headed for a big fall,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “The yield curves are all crying timber that a recession is almost a reality, and investors are tripping over themselves to get out of the way.”

The panic caused the Dow Jones industrial average to shed about 800 points Wednesday, in its biggest single-day drop of 2019.

Stocks bounced around most of Thursday, a reflection of investor uncertainty over the competing issues of China trade, the global bond market and an expanding U.S. economy.

By the end of the day, there was not that much change from when the session started. There was some help from a robust report on July retail sales from the Commerce Department. The Labor Department also reported that U.S. productivity rose 2.3% in the second quarter.

The president took to Twitter once again to blame the media for its reporting on the worsening world economy.

“Walmart, a great indicator as to how the U.S. is doing, just released outstanding numbers. Our Country, unlike others, is doing great! Don’t let the Fake News convince you otherwise,” Trump tweeted.

In a flurry of tweets, he defended his tariff decisions, praised Xi and urged the Chinese president to “humanely” resolve the protests that have gripped Hong Kong for more than two months.

“Of course China wants to make a trade deal,” Trump wrote. “Let them work humanely with Hong Kong first!”

China doesn’t want external advice on how to deal with Hong Kong.

“Hong Kong is purely China’s internal affair. We have noticed that President Trump has previously said that ‘Hong Kong is part of China and they’ll have to deal with that themselves. They don’t need advice,”’ said Chinese Foreign Ministry spokeswoman Hua Chunying.

Trade between the two biggest global economies has plunged, battering suppliers of goods from medical equipment to soybeans and threatening job losses. Chinese imports of U.S. goods fell 19% from a year earlier in July. Exports to the United States declined 6.5%.

China’s lopsided trade balance with the United States means Beijing has almost run out of imports that haven’t already been hit with retaliatory tariffs. But Beijing has extended punishment for U.S. companies by delaying customs clearance for their goods and delaying issuing licenses in finance and other fields.

Washington and Beijing are fighting over U.S. complaints that China steals or pressures companies to hand over technology and improperly subsidies its industries.

China offered to narrow its multibillion-dollar trade surplus with the U.S. by purchasing more soybeans and other exports. But negotiators are resisting pressure to roll back industry plans that the ruling Communist Party sees as a path to prosperity and global influence.

Trade talks broke down in May over how to enforce a deal. Beijing says Trump’s tariffs must be lifted as soon as an agreement takes effect. Washington says they must stay to enforce compliance.

Simeon Hyman, global investment strategist at ProShares, said the stock market’s middling mood on Thursday is a reflection of the “tug of war” between a strong American economy and “the rest of the world, which is not as healthy as the U.S. Those trade tensions with China are not going away.”

The mounting tension between the U.S. and China has unnerved financial markets that worry that the global economy will tip into recession.