Mar­kets tum­ble on grow­ing tariffs rift be­tween U.S., China

The Saline Courier Weekend - - NEWS -

WASH­ING­TON — Pres­i­dent Don­ald Trump de­clared Fri­day that he had “hereby or­dered” Amer­i­can companies “to im­me­di­ately start look­ing” for al­ter­na­tives to op­er­at­ing in China, hours af­ter Bei­jing an­nounced new trade sanc­tions on U.S. prod­ucts.

But as mar­kets in the

U.S., Asia and Europe tum­bled, the White House of­fered no fur­ther de­tails or ex­pla­na­tion of Trump’s in­ten­tions.

In­stead, the pres­i­dent tweeted that he would be “re­spond­ing to China’s Tariffs this af­ter­noon.”

“This is a GREAT op­por­tu­nity for the United States” he wrote.

The ris­ing ten­sions be­tween the world’s two big­gest economies un­nerved in­vestors al­ready on edge about the de­te­ri­o­rat­ing world economy. By early af­ter­noon Fri­day, the Dow Jones In­dus­trial Av­er­age has dropped more than 485 points.

“There doesn’t seem to be a floor un­der the spi­ral­ing down of the re­la­tion­ship, and world mar­kets are re­act­ing neg­a­tively to a busi­ness cli­mate be­set by un­cer­tainty and risk,” said Dou­glas Barry, spokesman for the U.s.-china Busi­ness Coun­cil. “It’s un­clear what the strat­egy is or if there is a strat­egy.”

The U.S. has said it plans to im­pose 10% tariffs on $300 billion of Chinese goods in two steps, on Sept. 1 and Dec. 15.

China re­sponded Fri­day with new tariffs of 5% and

10% on $75 billion of U.S. prod­ucts in re­tal­i­a­tion, deep­en­ing a con­flict over trade and tech­nol­ogy that threat­ens to tip a weak­en­ing global economy into re­ces­sion.

Like Trump’s, the Chinese tariffs will be im­posed in two batches — first on Sept. 1 and then on Dec. 15.

China will also go ahead with pre­vi­ously post­poned im­port du­ties on U.s.-made au­tos and auto parts, the Fi­nance Min­istry an­nounced.

On Fri­day, Trump tweeted, “Our great Amer­i­can companies are hereby or­dered to im­me­di­ately start look­ing for an al­ter­na­tive to China, in­clud­ing bring­ing... your companies HOME and mak­ing your prod­ucts in the USA. I will be re­spond­ing to China’s Tariffs this af­ter­noon.”

The White House did not im­me­di­ately re­spond to ques­tions about what author­ity the pres­i­dent be­lieves he has to or­der pri­vate companies to change their busi­ness prac­tices. And it re­mained un­clear hours af­ter his tweets ex­actly what he had in mind.

David French, se­nior vice pres­i­dent of gov­ern­ment re­la­tions at the Na­tional Re­tail Fed­er­a­tion, said it was “un­re­al­is­tic for Amer­i­can re­tail­ers to move out of the world’s sec­ond largest economy ... Our pres­ence in China al­lows us to reach Chinese cus­tomers and de­velop over­seas mar­kets.”

Trump was meeting

Fri­day with his trade ad­vis­ers, ac­cord­ing to two people with knowl­edge of the sit­u­a­tion. They were dis­cussing var­i­ous po­ten­tial op­tions, in­clud­ing the pos­si­bil­ity of im­pos­ing a 25% tar­iff on all Chinese ex­ports to Amer­ica, one of the people said. They spoke to AP on con­di­tion of anonymity be­cause they were not au­tho­rized to dis­close de­tails of closed-door meet­ings.

Peter Navarro, who ad­vises Trump on trade pol­icy, tried to down­play the im­pact of Chinese tar­iff hikes ahead of the meeting. He said they were “well an­tic­i­pated” and would only strengthen Trump’s re­solve.

The an­nounce­ment comes as lead­ers of the Group of 7 ma­jor economies pre­pare to meet in France this week­end.

The United States has been locked in a trade war with China for 13 months, rat­tling financial mar­kets, dis­rupt­ing in­ter­na­tional trade and weak­en­ing prospects for world­wide eco­nomic growth.

Wash­ing­ton ac­cuses

China of us­ing preda­tory tac­tics — in­clud­ing out­right theft of U.S. trade se­crets — in an ag­gres­sive drive to turn it­self into a world leader in cut­ting-edge tech­nolo­gies such as ar­ti­fi­cial in­tel­li­gence and elec­tric cars.

Twelve rounds of talks have failed to break the im­passe, though more ne­go­ti­a­tions are ex­pected next month. Chinese lead­ers have of­fered to al­ter de­tails of their poli­cies but are re­sist­ing any deal that would re­quire them to give up their as­pi­ra­tions to be­come a tech­no­log­i­cal pow­er­house.

The two coun­tries are also dead­locked over how to en­force any agree­ment.

China’s an­nounced tar­iff hikes — and Trump’s re­sponse — is the lat­est sign that both coun­tries are dig­ging in.

“China is sig­nal­ing yet again that it has no in­ten­tion of back­ing off from the trade war, fur­ther re­duc­ing the like­li­hood of the

U.S. and China agree­ing on any sort of trade deal in the com­ing months,” said Cor­nell Univer­sity econ­o­mist Eswar Prasad, for­mer head of the China divi­sion at the In­ter­na­tional Mone­tary Fund.

The Chinese said tariffs of 25% and 5% would be im­posed on U.s.-made au­tos and auto parts on Dec. 15. Bei­jing had planned those tar­iff hikes last year but tem­po­rar­ily dropped them to keep the talks go­ing.

BMW, Tesla, Ford and Mercedes Benz are likely to be the hard­est hit by the Chinese auto tariffs. In 2018, BMW ex­ported about 87,000 lux­ury SUVS to China from a plant near Spar­tan­burg, S.C. It ex­ports more ve­hi­cles to China than any other U.S. auto plant.

To­gether, Ford, BMW, Mercedes and oth­ers ex­ported about 164,000 ve­hi­cles to China from the U.S. in 2018, ac­cord­ing to the Cen­ter for Au­to­mo­tive Re­search, a think tank in Ann Ar­bor, Michi­gan. Most of them are lux­ury cars and SUVS with higher profit mar­gins that can cover higher U.S. wages. The ex­ports are down from about 262,000 in 2017.

Tesla, which is building a plant in China, last year got about 12% of its rev­enue by ex­port­ing about 14,300 elec­tric cars and SUVS from California to China, ac­cord­ing to Bar­clays. Most of Ford’s ex­ports are from the Lin­coln lux­ury brand, but most of the ve­hi­cles it sells in China are made in joint ven­ture fac­to­ries.

Trump al­ready has im­posed 25% tariffs on $250 billion of Chinese prod­ucts. Bei­jing re­tal­i­ated by im­pos­ing its own penal­ties on $110 billion of Amer­i­can goods. But their lop­sided trade bal­ance meant China was run­ning out of im­ports for re­tal­i­a­tion.

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