China vows re­tal­i­a­tion for $200B U.S. tar­iff threat

Yuma Sun - - OPINION -

BEI­JING — China’s govern­ment vowed Wednes­day to take “firm and force­ful mea­sures” as the U.S. threat­ened to ex­pand tar­iffs to thou­sands of Chi­nese im­ports like fish sticks, ap­ples and French doors, the lat­est salvo in an es­ca­lat­ing trade dis­pute that threat­ens to chill global eco­nomic growth.

China gave no de­tails, but it has plenty of op­tions to re­tal­i­ate that could ex­tend be­yond ad­di­tional tar­iffs on U.S. im­ports. There are fears that Bei­jing could at­tempt to dis­rupt oper­a­tions of Amer­i­can au­tomak­ers, re­tail­ers and oth­ers that see China as a key mar­ket.

The spi­ral­ing con­flict stems from Wash­ing­ton’s com­plaint that Bei­jing steals or pres­sures com­pa­nies to hand over tech­nol­ogy and con­cerns that plans for state-led de­vel­op­ment of Chi­nese cham­pi­ons in ro­bots and other fields might erode Amer­i­can in­dus­trial lead­er­ship.

A pos­si­ble sec­ond round of tar­iff hikes an­nounced Tues­day by the U.S. Trade Rep­re­sen­ta­tive tar­gets a $200 bil­lion list of Chi­nese goods. That came four days af­ter Wash­ing­ton added 25 per­cent du­ties on $34 bil­lion worth of Chi­nese goods and Bei­jing re­sponded by in­creas­ing taxes on the same amount of Amer­i­can im­ports.

The abrupt es­ca­la­tion is “to­tally un­ac­cept­able,” said a Com­merce Min­istry state­ment. It said Bei­jing would take un­spec­i­fied “nec­es­sary coun­ter­mea­sures” to pro­tect its “core in­ter­ests.”

Asked what Bei­jing would do, for­eign min­istry spokes­woman Hua Chun­y­ing gave no de­tails but said, “We will take firm and force­ful mea­sures.”

The USTR, the fed­eral agency that over­sees in­ter­na­tional trade pol­icy and ne­go­ti­a­tions, said it was re­spond­ing to Bei­jing’s de­ci­sion to re­tal­i­ate in­stead of chang­ing its poli­cies. Pres­i­dent Don­ald Trump has threat­ened higher tar­iffs on more than $500 bil­lion of goods, or nearly all of China’s an­nual ex­ports to the United States.

The USTR will ac­cept pub­lic com­ments on the lat­est round of tar­iffs and hold hear­ings Aug. 20-23 be­fore reach­ing a de­ci­sion af­ter Aug. 31, ac­cord­ing to a se­nior U.S. of­fi­cial who briefed re­porters on con­di­tion of anonymity.

The first U.S. tar­iff list fo­cused on Chi­nese in­dus­trial prod­ucts, an at­tempt to re­duce the di­rect im­pact on Amer­i­can con­sumers.

The new list in­cludes vac­uum clean­ers, fur­ni­ture, auto and bi­cy­cle parts, French doors and ply­wood. It left un­touched U.S.-branded smart­phones and lap­top com­put­ers.

That “will hit the Chi­nese ex­port sec­tor hard,” said Ra­jiv Biswas of IHS Markit in a re­port.

China im­ports far less from the U.S. than the U.S. im­ports from China. That means China’s im­ports of U.S. goods are so small that Bei­jing “can­not match fresh U.S. tar­iffs,” said Vishnu Varathan of Mizuho Bank in a re­port.

China bought $130 bil­lion of U.S. goods last year. Both gov­ern­ments have raised tar­iffs on $34 bil­lion worth of each other’s goods and al­ready said they are con­sid­er­ing ad­di­tional charges on an­other $16 bil­lion. That would leave China only $80 bil­lion for fur­ther re­tal­i­a­tion.

In­stead, Bei­jing has other ways to dis­rupt Amer­i­can com­pa­nies’ oper­a­tions. Reg­u­la­tors can deny or can­cel li­censes or launch lengthy tax, en­vi­ron­men­tal or anti-mo­nop­oly in­ves­ti­ga­tions.

Com­pa­nies are watch­ing U.S. chip­maker Qual­comm Inc., which has waited months for Chi­nese reg­u­la­tors to de­cide whether to al­low its pro­posed $44 bil­lion ac­qui­si­tion of NXP Semi­con­duc­tors. All other ma­jor gov­ern­ments have ap­proved the deal.

The eco­nomic im­pact of the con­flict al­ready is spread­ing.

The Euro­pean Union Cham­ber of Com­merce in China said this week its mem­ber com­pa­nies are rear­rang­ing the global flow of their goods to make sure any bound for the United States don’t pass through China.

Mem­bers of Con­gress are in­creas­ingly ques­tion­ing Trump’s tac­tics. They warned tar­iffs on im­ports raise con­sumer prices and ex­pose U.S. farm­ers and man­u­fac­tur­ers to re­tal­i­a­tion.

“Tonight’s an­nounce­ment ap­pears reck­less and is not a tar­geted ap­proach,” said Se­nate Fi­nance Chair­man Or­rin Hatch in a state­ment.

BY THE NUM­BERS Dow Jones In­dus­tri­als: – 219.21 to 24,700.45 Stan­dard & Poor’s: – 19.82 to 2,774.02 Nas­daq Com­pos­ite In­dex: – 42.59 to 7,716.61

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