China hits back in trade war with U.S.

by Kim Boateng Last updated on May 30th, 2019,

China has said it will impose tariffs on $60 billion of US goods from 1 June, extending a bilateral trade war. The move comes three days after the US more than doubled tariffs on $200 billion of Chinese imports.

Earlier, US President Donald Trump denied that US consumers would pay for higher tariffs on Chinese imports and warned China not to follow suit.

But Beijing said it would not swallow any “bitter fruit” that harmed its interests.

China has raised tariffs on more than 5,000 US products, with the new rates ranging from 5% to 25%.

Items affected include beef, lamb and pork products, as well as various varieties of vegetables, fruit juice, cooking oil, tea and coffee.

The move was announced in a statement by the Tariff Policy Commission of China’s cabinet, the State Council.

Chinese foreign ministry spokesman Geng Shuang told a news briefing in Beijing that China would “never surrender to external pressure”.

Beijing vowed to respond to the latest US tariffs. “As for the details, please continue to pay attention. Copying a US expression — wait and see,” Geng Shuang said.

 

US markets reacted badly to the move. Within minutes of opening, the Dow Jones Industrial Average was down more than 460 points, or 1.8%, while the broad-based S&P 500 also fell 1.8% and the Nasdaq shed 2.3%.

Markets in Europe were also depressed by latest round of tit-for-tat tariffs, with London’s FTSE 100 down about 0.5%, while the main indexes in Frankfurt and Paris were more than 1% lower.

“China should not retaliate – will only get worse!” Mr Trump tweeted shortly before news of the Chinese decision came.

I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” Trump wrote.

Mr Trump also said China had “taken so advantage of the US for so many years”.

He added that US consumers could avoid the tariffs by buying the same products from other sources.

“Many tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!” he said.

The US argues that China’s trade surplus with the US is the result of unfair practices, including state support for domestic companies. It also accuses China of stealing intellectual property from US firms.

The latest round of US-Chinese trade negotiations ended in Washington on Friday without a deal.

Mr Trump’s approach in the dispute has put him at odds with his own top economic adviser, Larry Kudlow, who has said “both sides will suffer”.

The Republican US president last week also ordered US Trade Representative Robert Lighthizer to begin imposing tariffs on all remaining imports from China, a move that would affect an additional $300 billion worth of goods.

Asked about the threat, Geng said: “We have said many times that adding tariffs won’t resolve any problem … We have the confidence and the ability to protect our lawful and legitimate rights.”

Chinese state media kept up a steady drum beat of strongly worded commentary on Monday, reiterating that China’s door to talks was always open, but vowing to defend the country’s interests and dignity.

In a commentary, state television said the effect on the Chinese economy from the US tariffs was “totally controllable.”

“It’s no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger.”

Before high-level talks last week in Washington, China tried to delete commitments from a draft agreement that Chinese laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers. That dealt a major setback to negotiations.

Trump has since defended the tariff hike and said he was in “absolutely no rush” to finalize a deal.

White House economic adviser Larry Kudlow said on Sunday there was a “strong possibility” Trump will meet Chinese President Xi Jinping at a G20 summit in Japan in late June.

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