Washington D.C., USA : U.S. tariffs on $200 billion worth of Chinese goods and retaliatory tariffs by Beijing on $60bn worth of US products went into effect on Monday. The two countries already exchanged tariffs on $50bn worth of each other’s goods earlier this year.
President Donald Trump’s administration levied tariffs of 10 percent on $200 billion of Chinese products that include furniture and appliances, with the rate set to increase to 25 percent by the end of the year. It is Washington’s third tranche of China-focused levies and part of a strategy to pressure Beijing into changing trade practices that Trump has claimed hurt American companies.
In response, Chinese President Xi Jinping’s government said it would impose taxes on 5,207 U.S. imports worth about $60 billion. Products such as liquefied natural gas, coffee and various types of edible oil will see a 10 percent levy while a 5 percent tax will be imposed on items such as frozen vegetables, cocoa powder and chemical products, Beijing said.
The U.S. and China have already applied tariffs to $50 billion of each other’s goods — moves that threaten to derail global supply chains.
Hours after the new tariffs took place, Chinese state news agency Xinhua accused the U.S. of “trade bullyism.” The media outlet also said Beijing was willing to go back to the negotiating table with Washington if discussions were “based on mutual respect and equality,” Reuters reported.
Over the weekend, Beijing rejected Washington’s invitation to restart trade talks and it’s not clear when both sides will meet next.
“It’s hardly surprising the Chinese have called off these talks, they don’t really know who to talk to or what to talk about since the Trump administration has sent very mixed signals about what they want,” said Matthew Goodman, senior vice president and senior adviser for Asian economics at The Center for Strategic and International Studies.
Since Trump’s first round of duties were imposed in July, Beijing has retaliated with defiant countermeasures of its own. The Chinese finance ministry has described Trump’s policies as “unilateralism and trade protectionism,” while state-controlled media insist that Beijing will benefit from the spat.
U.S. Secretary of State Mike Pompeo said on Sunday that his government was “determined” to win the trade war.
Many now expect the White House to go ahead with a fourth round of tariffs.
When Trump announced news of Monday’s tariffs last week, he said any retaliatory action from China would prompt Washington to “immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”
“I think Donald Trump is going to continue doing this until he feels he gets some satisfaction from the Chinese,” said Goodman.
Contributing to the hostile atmosphere are fresh military tensions.
Washington on Thursday imposed sanctions on a Chinese military unit for purchasing Russian weapons, claiming the transaction violated a U.S. sanctions law known as Countering America’s Adversaries Through Sanctions Act. The Chinese government summoned the U.S. ambassador in Beijing over the matter and said Beijing would recall its navy chief from a visit to the United States.
On Saturday, China summoned the US ambassador in Beijing and postponed joint military talks in protest against a US decision to sanction a Chinese military agency and its director for buying Russian fighter jets and a surface-to-air missile system. China also recalled its naval chief from the US.
US lawmakers have called on their government to sanction Chinese officials involved in a counter-terrorism campaign in the western Chinese territory of Xinjiang, which rights activists say has led to widespread human rights abuses of Muslim minorities.
Rob Carnell, chief Asia economist at ING, said in a note to clients that in the absence of any incentives Beijing would likely hold off on any further negotiations for now.
“It would look weak both to the US and at home,” he said, adding that there is “sufficient stimulus in the pipeline” to limit the damage of the latest tariffs on China’s growth.
“The US-China trade war has no clear end in sight.”
Economists have warned that a protracted dispute will eventually stunt growth not just in the US and China but across the broader global economy. Worries about the confrontation have already rattled financial markets.
President Donald Trump on Saturday reiterated a threat to impose further tariffs on Chinese goods should Beijing retaliate, in line with his previous comments signalling that Washington may move to impose tariffs on virtually all imported Chinese goods if the administration does not get its way.
China imports far less from the United States, making a dollar-for-dollar match on any new US tariffs impossible.
Instead, it has warned of “qualitative” measures to retaliate. Though Beijing has not revealed what such steps might be, business executives and analysts say China could withhold exports of certain products to the US or create more administrative red tape for American companies operating in China.
Some analysts say there is also a risk that China could allow its currency to weaken again to cushion the blow to its exporters.
European stocks were subdued on Monday, with mining stocks coming under selling pressure on concerns that an escalating trade war between the United States and China could hurt global growth.
The pan-European Stoxx Europe 600 index was down 0.22 percent at 377.02 in late opening deals after rising 0.4 percent on Friday.
The German DAX was losing half a percent, while France’s CAC 40 index and the U.K.’s FTSE 100 were down around 0.4 percent.
Asian shares stumbled in holiday-thinned trading on Monday as China’s decision to cancel talks with the United States sparked fears of a protracted trade war, while oil rallied as Saudi Arabia ruled out increasing supplies to cool crude prices.
U.S. stock futures slipped 0.2 percent, while spreadbetters pointed to a subdued start for Europe with futures for Eurostoxx 50, Germany’s Dax and London’s FTSE all opening in the red.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell almost 1 percent. Hong Kong was the worst performer with its Hang Seng index down 1.7 percent.
Share markets in major Asian centres Japan, China and South Korea were closed for a holiday on Monday, while currency markets were subdued as banks in those countries were shut.
The intensifying dispute between the world’s two biggest economies has spooked financial markets worried about the impact on global growth.
The Japanese yen, which sees fund inflows during times of crisis, held above a recent two-month trough at 112.6 per dollar while the trade-sensitive Australian dollar slipped from a 3-1/2 week top to $0.7263.
The pound last at $1.3072, slightly above Friday’s $1.3053 which was the lowest since mid-September.
The euro eased from a three-month peak on Monday to last trade at $1.1733.
The dollar index, which measures the greenback against a basket of major currencies, was last at 94.315 to edge above its weakest point since early July touched on Friday.
Oil prices gained as OPEC’s leader Saudi Arabia and its biggest oil-producer ally outside the group Russia effectively rebuffed U.S. President Donald Trump’s calls for action to lower prices.
Brent crude futures gained $1.60 to a four-month peak of $80.3 a barrel while U.S. crude futures shot up $1.3 to $72.10, a level not seen since early July.