Friday, 20 July, 2018

Trump administration announces $US200 billion in extra China tariffs

Soybean prices have fallen dramatically in recent weeks.
Daniel Acker  Bloomberg Soybean prices have fallen dramatically in recent weeks. Daniel Acker Bloomberg
Deanna Wagner | 12 July, 2018, 13:42

With no end in sight for the Trump administration's trade war with China, which escalated on Tuesday with an announcement that an additional US$200 billion in Chinese goods will face tariffs, the discussion about how China will respond is heating up.

China' s Ministry of Commerce said that the tariffs are "totally unacceptable" and it is hurting the entire world, as well as China.

Beijing has said it would hit back against Washington's escalating tariff measures, including through "qualitative measures", a threat that USA businesses in China fear could mean anything from stepped-up inspections to delays in investment approvals and even consumer boycotts. It's unclear what that action could include. That means China's imports of U.S. goods are so small that Beijing "cannot match fresh United States tariffs", said Vishnu Varathan of Mizuho Bank in a report.

The proposal comes only a few days after the Trump administration fired the first real opening salvo in the trade war, implementing 25 percent tariffs on $34 billion in Chinese imports on Friday.

The new list published on Tuesday targets many more consumer goods than those covered under the tariffs imposed last week, raising the direct threat to consumers and retail firms.

Farmer Terry Davidson walks through his soy fields July 6, 2018, in Harvard, Illinois, the same day China imposed retaliatory tariffs aimed at the U.S. soybean market.

"But China's reaction to the U.S. tariffs could pose a far greater threat to the index in time".

The tariffs will not be imposed until after a two-month period of public comment on the proposed list.

"The Chinese government as always will have no choice but to take the necessary countermeasures", said China's ministry of commerce in a statement, without elaborating further.

China gave no details, but it has plenty of options to retaliate that could extend beyond additional tariffs on U.S. imports.

In financial markets, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.5 per cent, while the main indexes in Hong Kong and Shanghai fell more than 2 per cent.

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If the United States were to impose tariffs on oil, USA oil sellers would have to look for other destinations and attract new customers, which could cost them more.

The U.S. Chamber of Commerce has supported Trump's domestic tax cuts and efforts to reduce regulation of businesses, but does not back Trump's aggressive tariff policies.

"Tariffs are taxes, plain and simple".

US Senate Finance Committee Chairman Orrin Hatch described the move was "reckless".

In Beijing, Li Chenggang, assistant minister at China's Commerce Ministry, said that the latest USA proposals would hurt both countries and pointed to declines in Chinese export growth and overseas investment to the United States in the first half of this year. Imposing taxes on another $200 billion worth of products will raise the costs of every-day goods for American families, farmers, ranchers, workers, and job creators.

"Unfortunately, China has not changed its behavior - behavior that puts the future of the USA economy at risk", he continues.

Chinese tactics, the administration said, include outright cybertheft and forcing USA companies to hand over technology in exchange for access to the Chinese market.

They also said they remain open to working with China to try to resolve the dispute, but the response from Beijing so far has been unsatisfactory.

The Office of the US Trade Representative is seeking submissions on the latest proposed tariffs and will conduct hearings in late August, making September the earliest possible implementation date for the new import taxes. During a visit to Germany this week by Chinese Premier Li Keqiang, the countries signed business deals worth more than $23 billion.

So far, China has been measured in its response to the new USA trade policy.