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Tit for tat as China strikes back over US tariff plans

Speed of retaliatory steps stuns financial markets

Workers load imported soybeans onto trucks at a port in Nantong in China’s eastern Jiangsu province yesterday as China unveiled plans to hit major US exports Picture: AFP
Workers load imported soybeans onto trucks at a port in Nantong in China’s eastern Jiangsu province yesterday as China unveiled plans to hit major US exports Picture: AFP

China hit back quickly yesterday against the Trump administration’s plans to impose tariffs on $50-billion (R596-billion) in Chinese goods, retaliating with a list of similar duties on key US imports including soybeans, planes, cars, beef and chemicals.

The speed with which the trade struggle between Washington and Beijing is ratcheting up – China took less than 11 hours to respond with its own measures – has led to a sharp sell-off in global stock markets and commodities.

US President Donald Trump, who has long charged that his predecessors served the United States badly in trade matters, rejected the notion that the tit-for-tat moves amounted to a trade war between the world’s two economic superpowers.

“We are not in a trade war with China. That war was lost many years ago by the foolish, or incompetent, people who represented the US,” Trump wrote in a post on Twitter yesterday.

Because the actions will not be carried out immediately, there may be room for manoeuvre.

Publication of Washington’s list starts a period of public comment and consultation expected to last around two months.

The effective date of China’s moves depends on when the US action takes effect.

US Commerce Secretary Wilbur Ross said in an interview with CNBC that it would not be surprising if the US and China trade actions led to negotiations, although he would not speculate on when this might happen.

Investors were wondering, nonetheless, how far one of the worst trade disputes in many years could escalate.

“The assumption was China would not respond too aggressively and avoid escalating tensions. China’s response is a surprise for some people,” Julian Evans-Pritchard, senior China economist at Capital Economics, said.

He noted that neither side had yet called for enforcement of the tariffs.

“It’s more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force.”

US-made goods that appear to face added tariffs in China, based on an analysis of Beijing’s list, include Tesla electric cars, Ford Lincoln cars, Gulfstream jets made by General Dynamics and Brown-Forman’s Jack Daniel’s whiskey.

Unlike Washington’s list, which was filled with many obscure industrial items, China’s list strikes at signature US exports, including soybeans, frozen beef, cotton and other key agricultural commodities produced in states from Iowa to Texas that voted for Trump in the 2016 presidential election.
“China is also trying to weaken our will by targeting certain segments of our economy,” White House trade adviser Peter Navarro said in an interview with National Public Radio.

“But let’s remember: we buy five times more goods than they buy from us.

“They have a lot more to lose in any escalation in this matter.”

While Washington targeted products that benefit from Chinese industrial policy, including its “Made in China 2025” initiative to replace advanced technology imports with domestic products in strategic industries such as advanced IT and robotics, Beijing’s appears aimed at inflicting political damage.

Tobacco and whisky, for example, are both on Beijing’s list and are produced in states including Kentucky, home of Senate leader Mitch McConnell.

The list of 25% additional tariffs on US goods covered 106 items with a trade value matching the $50-billion on Washington’s list, China’s commerce and finance ministries said.

“This is a real gamechanger and moves the trade dispute away from symbolism to measures which would really hurt US agricultural exports,” Commerzbank commodities analyst Carsten Fritsch said.

China’s tariff list covers aircraft that would probably include older models such as Boeing’s workhorse 737 narrowbody jet, but not newer models like the 737 MAX.

Beijing’s announcement triggered heavy selling in global financial markets, with US stock futures sliding 1.5% and US soybean futures plunging nearly 5% and on track for their biggest fall since July 2016.

The dollar briefly extended early losses, while China’s yuan skidded in offshore trade.

Hours earlier, the US unveiled a detailed breakdown of some 1 300 Chinese industrial, transport and medical goods that could be subject to 25% duties, ranging from light-emitting diodes to machine parts.

The US move, broadly flagged last month, is aimed at forcing Beijing to address what Washington says is deeply entrenched theft of US intellectual property and forced technology transfer from US companies to Chinese competitors, charges Chinese officials deny.

Foreign ministry spokesman Geng Shuang said China had shown sincerity in wanting to resolve the dispute through negotiations.

“But the best opportunities for resolving the issues through dialogue and negotiations have been repeatedly missed by the US side,” he said yesterday.

Many consumer electronics products such as cellphones made by Apple Inc and laptops made by Dell were excluded from the US list, as were footwear and clothing, drawing a sigh of relief from retailers who had feared higher costs for American consumers. – Reuters

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