Duelling tariffs raise ‘fears’ of long US-China trade battle
Trump administration like ‘gang of hoodlums’
BEIJING/WASHINGTON, July 7, (Agencies): The United States and China exchanged the first salvos in what could become a protracted trade war on Friday, slapping tariffs on $34 billion worth of each others’ goods and giving no sign of willingness to start talks aimed at a reaching a truce.
Duties on a range of Chinese goods imported into the United States took effect on Friday and were immediately countered by measures from China, with Beijing accusing the United States of triggering the “largest-scale trade war”.
The escalating fight between the world’s two biggest economies meant that it could “take economic and political pain to get these two parties to the (negotiating) table”, said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.
President Donald Trump is already threatening additional rounds of tariffs, possibly targeting more than $500 billion worth of Chinese goods - roughly the total amount of US imports from China last year.
It will take weeks or months for the US Trade Representative to review and possibly activate any new rounds of punishment.
“The key questions during that time are what will happen to financial markets, how will US voters react and will China’s economy start to wobble,” Kennedy said in a telephone interview.
Erin Ennis, senior vice-president of the US China Business Council, said there was a danger the two sides will dig in on trade sanctions without a clear strategy for resuming negotiations.
While US companies doing business in China agree with Trump’s complaint about Chinese intellectual property practices, Ennis said they do not see tariffs pushing China into submission.
Forced
China’s commerce ministry said it was forced to retaliate, meaning imported US goods including cars, soybeans, and lobsters also faced 25 percent tariffs.
Some of Trump’s fellow Republicans in the US Congress lashed out at his actions.
“Tariffs not only hurt our farmers, ranchers and airplane manufacturers, but they also harm every American consumer. We should be working with our allies to isolate China rather than escalate a trade war,” said Senator Jerry Moran, who represents the agriculture-heavy state of Kansas.
China’s soymeal futures fell more than 2 percent on Friday afternoon before recovering most of those losses amid initial market confusion over whether Beijing had actually implemented the tariffs, which it later confirmed it had.
Friday’s long-expected China tariff volley fuelled fear that a prolonged and escalating battle would hurt global trade, investment and growth, while also damaging US farm exports and potentially driving up food prices in China.
For example, US-based audio company Sonos Inc noted in an initial public offering on Friday its performance “may be materially harmed” by trade restrictions.
“Trade war is never a solution,” Chinese Premier Li Keqiang said at a news briefing with Bulgarian Prime Minister Boyko Borissov in Sofia before a summit with 16 central and eastern European countries.
“China would never start a trade war but if any party resorts to an increase of tariffs, then China will take measures in response to protect development interests,” he said.
There was no sign of renewed negotiations between US and Chinese officials in the run-up to Friday, business
sources in Washington and Beijing said.
Slammed
Chinese state media slammed Trump’s trade policies and on Friday likened his administration to a “gang of hoodlums”.
China’s commerce ministry called the US actions “a violation of world trade rules” and said it had “initiated the largest-scale trade war in economic history”.
Trump has railed against Beijing for intellectual property theft, barriers to entry for US businesses and a $375 billion US trade deficit with China.
A China central bank adviser said the planned US import tariffs on $50 billion worth of Chinese goods - $34 billion plus a planned follow-on list worth $16 billion - would cut China’s economic growth by 0.2 percentage points, the official Xinhua news agency reported on Friday.
China’s tariff list is heavy on agricultural
goods such as soybeans, sorghum and cotton, threatening US farmers in states that backed Trump in the 2016 US election, such as Texas and Iowa.
Late Friday, China announced it was expanding its existing complaint against the United States at the World Trade Organization, hours after the countries slapped tit-for-tat tariffs on billions of dollars of cross-border trade. Beijing called the new stage of the confrontation — which began when Washington pulled the trigger on 25 percent duties on $34 billion annual imports of Chinese machinery, electronics and other goods — “the largest trade war in economic history.”
And China’s foreign ministry said retaliatory tariffs of equal size and scope had taken effect “immediately.”
There was confusion about exactly what US products would be hit in the initial wave of tariffs as China’s Commerce Ministry had not published an updated list.