Washington D.C., USA: The Trump administration released a list of 10 percent tariffs on additional $200 billion in Chinese goods on Tuesday, as it escalates a trade war with China. The tariffs will not go into effect immediately but will undergo a two-month review process, with hearings Aug. 20-23.
“The $200 billion figure we’re looking at is roughly equal to their exports to us,” the U.S. Trade Representative Robert Lighthizer said.
Last week, Washington imposed a 25-per-cent tariff on 34 billion dollars worth of Chinese goods – with the aim of shortly increasing that amount to 50 billion dollars – prompting China to retaliate with new duties on hundreds of US products.
US President Donald Trump warned after the Chinese tit-for-tat measure that he would then seek to impose new duties on up to 500 billion dollars worth of Chinese goods. The total equals more than the sum of all goods China sent to the US last year.
“As a result of China’s retaliation and failure to change its practices, the President has ordered USTR to begin the process of imposing tariffs of 10 per cent on an additional 200 billion dollars of Chinese imports,” said US Trade Representative Robert Lighthizer.
The list of new products, which is contained on dozens of pages of a USTR report, contains various food items, chemicals, minerals, tobacco, electronics, office goods among other items.
The USTR will accept public comments and hold a hearing on the new list in the coming weeks, in a process to conclude at the end of August.
“For many years, China has pursued abusive trading practices with regard to intellectual property and innovation,” Lighthizer said.
The US government has also said Beijing “sponsors the outright theft of US technology for commercial benefit.”
Last week, China accused the US of “bullying” and launching the “biggest trade war in history.”
China has focused its selection of US goods on products originated in US states where Trump enjoys significant support, in what appears to be an effort to upset his voting base.
The trade war between the two global giants comes on the heels of the US starting similar conflicts with its close allies, including Canada and the European Union.
Experts warn Trump’s trade policies would hurt jobs in the United States and could damage the global economy.
Trump says he is trying to correct a global trading system he views as unfair to US workers and companies.
U.S. Trade Representative Robert Lighthizer released the following statement regarding the new tariffs:
“On Friday, in response to unfair Chinese practices, the United States began imposing tariffs of 25 percent on approximately $34 billion worth of Chinese imports. These tariffs will eventually cover up to $50 billion in Chinese imports as legal processes conclude. The products targeted by the tariffs are those that benefit from China’s industrial policy and forced technology transfer practices.
China has since retaliated against the United States by imposing tariffs on $34 billion in U.S. exports to China, and threatening tariffs on another $16 billion. It did this without any international legal basis or justification.
As a result of China’s retaliation and failure to change its practices, the President has ordered USTR to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports. This is an appropriate response under the authority of Section 301 to obtain the elimination of China’s harmful industrial policies. USTR will proceed with a transparent and comprehensive public notice and comment process prior to the imposition of final tariffs, as we have for previous tariffs.
On August 14, 2017, President Trump instructed USTR to begin the Section 301 process. For many years, China has pursued abusive trading practices with regard to intellectual property and innovation. USTR conducted a thorough investigation over an 8-month period, including public hearings and submissions. In a detailed 200-page report, USTR found that China has been engaging in industrial policy which has resulted in the transfer and theft of intellectual property and technology to the detriment of our economy and the future of our workers and businesses.
USTR’s Section 301 report found that Chinese policies and practices force U.S. innovators to hand over their technology and know-how as the price of doing business in China. China also uses non-economic means to obtain U.S. technology, such as using state-owned funds and companies to buy up American businesses and imposing burdensome intellectual property licensing requirements in China. USTR’s report also found that the Chinese government sponsors the outright theft of U.S. technology for commercial benefit. These practices are an existential threat to America’s most critical comparative advantage and the future of our economy: our intellectual property and technology.
For over a year, the Trump Administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition. We have been very clear and detailed regarding the specific changes China should undertake. Unfortunately, China has not changed its behavior – behavior that puts the future of the U.S. economy at risk. Rather than address our legitimate concerns, China has begun to retaliate against U.S. products. There is no justification for such action.
As in the past, the United States is willing to engage in efforts that could lead to a resolution of our concerns about China’s unfair trade practices and to China opening its market to U.S. goods and services. In the meantime, we will remain vigilant in defending the ability of our workers and businesses to compete on a fair and reciprocal basis.”
Market reaction to latest USA, China trade row
China markets dropped on the back of the news, with the Shanghai composite sinking 2.31 percent in morning trade. The index had closed higher for its third consecutive session on Tuesday after a recent bout of weakness took the benchmark into bear market territory — referring to a fall of at least 20 percent from recent highs — where it currently remains in.
The smaller Shenzhen composite tumbled 2.63 percent and the blue-chip CSI 300 index fell 2.4 percent.
Hong Kong’s Hang Seng Index slumped 2.02 percent in early trade, with the materials sector taking the biggest hit in the morning. Financial and information technology stocks dropped more than 2 percent.
Meanwhile, Japan’s Nikkei 225 fell 1.74 percent, with losses steepening through the morning as trade-sensitive stocks, such as automakers, mostly dropped: Toyota Motor fell 0.98 percent. Other Japanese exporters also traded lower, with chip-related company Advantest down 2.28 percent and Canon slipping 1.13 percent.
The dollar was a touch softer against the safe-haven yen following the latest tariff news, with the greenback trading at 110.90 at 9:40 a.m. HK/SIN, after trading above the 111 level overnight.
Elsewhere, the Kospi declined 1.13 percent as South Korean exporters took a hit amid broad-based declines. Hyundai Motor declined 2.43 percent and tech heavyweight Samsung Electronics dropped 1.3 percent.
Over in Australia, the S&P/ASX 200 shed 0.66 percent, with the energy, materials and utilities sectors recording the largest declines. The Aussie, considered a liquid proxy for China-related trades, fell 0.45 percent against the dollar to $0.7423.
The yen, often sought in times of political tensions and market turmoil, gained against a number of peers.
The dollar traded at 111.00 yen, pulled back from a near two-month peak of 111.355.
The euro fell 0.1 percent to 130.30 yen and the Australian dollar lost 0.5 percent to 82.40 yen.
China’s yuan lost 0.3 percent against the dollar and back towards an 11-month low plumbed last week.
The 10-year Treasury note yield fell 3 basis points to 2.840 percent, pulling back sharply from a one-week peak of 2.875 percent scaled the previous day.
Oil prices fell after the United States said it would consider requests from some countries to be exempted from sanctions it will put into effect in November that prevents Iran from exporting oil. [O/R]
Brent crude futures lost 1.1 percent to $78.02 a barrel. Oil had risen the previous day, supported by a larger-than expected U.S. stock draw and supply concerns in Norway and Libya.
Copper on the London Metal Exchange sank roughly 3 percent to brush $6,092.50 per tonne, lowest since July 2017, before pulling back a little to $6,175.00.
MSCI’s index of Asia Pacific shares outside of Japan tanked 1.31 percent in Asia morning trade amid the sharp turn in sentiment on Wednesday.
U.S. stock futures traded lower Tuesday night after the White House announced a list of tariffs on $200 billion in Chinese goods.
Dow Jones mini futures fell 1 percent as investors digested the latest escalation in trade tensions between the two economies.
As of 8:50 p.m. ET, the implied open for the Dow Jones Industrial Average was more than 200 points lower. The implied opens for the S&P 500 and the Nasdaq were also in the red.
On Tuesday, the Dow rose 0.58 percent, or 143.07 points, to close at 24,919.66 — the index’s fourth consecutive session of gains. The S&P 500 edged up by 0.35 percent to 2,793.84 and the Nasdaq composite finished higher by 0.04 percent at 7,759.20.
The advance on Wall Street came as corporate earnings season rolled around.
Beijing Vows to Respond if US Imposes Additional Tariffs on Chinese Goods
China commerce ministry announced on Wednesday that Beijing would take retaliatory measures imposes additional tariffs on Chinese goods.
The Chinese commerce ministry said that it was shocked by Washington’s trade actions and that it would respond if US imposes additional tariffs on some $200 billion in Chinese goods, that US President Donald Trump administration revealed on Tuesday.
Trump administration announced earlier that it would be imposing 10 percent tariffs, which is an add-on to the US government’s previous tariffs that went into effect past Friday.
The tariffs introduced by Washington will have to go through a two-month review process to allow the US public to offer their comments on the matter.
China’s commerce ministry also said earlier that it is raising “anti-dumping tariff rates” for some optical fiber products originating from the United States, effective on Wednesday, July 11.
The new anti-dumping tariff rates for dispersion unshifted single-mode optical fiber imported from the U.S. range between 33.3% to 78.2%, compared with 4.7% to 18.6% as set in 2011.
U.S. companies including Corning (NYSE:GLW), OFS Fitel, and Draka Communications Americas are among firms affected by the tariff change, the ministry said on its website.