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China vows to hit back over U.S. proposal for fresh tariffs

Published 07/11/2018, 03:22 PM
Updated 07/11/2018, 03:22 PM
© Reuters. FILE PHOTO: File picture of workers riding on an motor rickshaw through an aluminium ingots depot in Wuxi

© Reuters. FILE PHOTO: File picture of workers riding on an motor rickshaw through an aluminium ingots depot in Wuxi

By Tony Munroe and Eric Beech

BEIJING/WASHINGTON (Reuters) - China accused the United States of bullying and warned it would hit back after the Trump administration raised the stakes in their trade dispute, threatening 10 percent tariffs on $200 billion of Chinese goods and rattling global markets.

China's commerce ministry said on Wednesday it was "shocked" and would complain to the World Trade Organisation, but did not immediately say how Beijing would retaliate in the dispute between the world's two biggest economies. In a statement, it called the U.S. actions "completely unacceptable".

The Chinese foreign ministry said Washington's threats were "typical bullying" and described the dispute as a "fight between unilateralism and multilateralism".

U.S. officials on Tuesday issued a list of thousands of Chinese goods to be hit with the new tariffs. The top items by value were furniture at $29 billion of imports in 2017, network routers worth $23 billion last year and computer components to the value of $20 billion.

The list is subject to a two-month public comment period.

Some U.S. business groups and lawmakers from President Donald Trump's own Republican Party who support free trade were critical of the escalating tariffs. The Republican-controlled Senate voted 88-11 in favor of a non-binding resolution calling for Congress to have a role in implementing such tariffs.

Republican U.S. Senate Finance Committee Chairman Orrin Hatch said the U.S. announcement "appears reckless and is not a targeted approach." Republican U.S. House of Representatives Speaker Paul Ryan accused China of unfair trade practices but added, "I don't think tariffs are the right way to go."

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. Imposing taxes on another $200 billion worth of products will raise the costs of every day goods for American families," a Chamber spokeswoman said.

Among the potential ways Beijing could hit back are "qualitative measures," a threat that U.S. businesses in China fear could mean anything from stepped-up inspections to delays in investment approvals and even consumer boycotts.

HOLDING UP LICENSES

The Wall Street Journal, citing unnamed Chinese officials, said Beijing was considering holding up licenses for U.S. companies, delaying approvals of mergers involving U.S. firms and stepping up border inspections of American goods.

China could also limit visits to the United States by Chinese tourists, a business that state media said is worth $115 billion, or shed some of its U.S. Treasury holdings, Iris Pang, Greater China economist at ING in Hong Kong, wrote in a note.

The $200 billion far exceeds the total value of goods China imports from the United States, which means Beijing may need to think of creative ways to respond to such U.S. measures.

It also highlights how dependent U.S. businesses and consumers are on Chinese goods. In Trump's first round of tariffs, China accounted for 20 percent of total U.S. imports, meaning that substitutes were readily available. In this round, China accounted for more than half of the imports.

There was a price to be paid by American companies as government policies legislated winners and losers.

Home furnishing retailers are expected to be hit particularly hard because China supplies 65 percent of U.S. furniture imports, according to analysts at Goldman Sachs (NYSE:GS).

The prospect of a 10 percent tariff on Chinese furniture imports sent shares of online home store WayFair Inc (N:W) down nearly 4 percent, while shares of Restoration Hardware (N:RH) tumbled nearly 6 percent.

Auto parts retailers, which would also be affected by the latest tariff threats the U.S. lobbed at China, fell more steeply than the broader market. Shares of Advance Auto Parts Inc (N:AAP) were down 1.6 percent, Autozone Inc (N:AZO) fell 1.8 percent and O'Reilly Automotive Inc (O:ORLY) almost 2 percent.

Investors fear an escalating Sino-American trade war could hit global growth and damage sentiment.

By early afternoon, the Dow Jones Industrial Average (DJI) was down 0.72 percent, the S&P 500 (SPX) was down 0.65 percent, and the Nasdaq was off 0.62 percent.

The MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) fell 1.12 percent, while the main indexes in Hong Kong (HSI) and Shanghai (SSEC) recovered somewhat after falling more than 2 percent.

Trump has been following through on pledges he made during his 2016 presidential campaign to get tough on China, which he accuses of unfair trade practices including theft of intellectual property and forced technology transfer that have led to a $375 billion U.S. trade deficit with China.

The U.S. president has said he may ultimately impose tariffs on more than $500 billion worth of Chinese goods, roughly the total amount of U.S. imports from China last year.

The new list targets many more consumer goods than those covered under the tariffs imposed last week, raising the direct threat to consumers and retail firms and increasing the stakes for Republican U.S. lawmakers facing elections in November.

U.S. financial analysts said Trump appeared to believe there was a political benefit to waging a trade war, although that could change quickly amid economic fallout.

© Reuters. FILE PHOTO: File picture of workers riding on an motor rickshaw through an aluminium ingots depot in Wuxi

"It is now much more likely that the dispute will continue for a prolonged period of time and that we will see ratcheting up of protectionist measures," said Elena Duggar, an associate managing director at Moody's, the credit rating agency.

Latest comments

Cheap Chinese goods have literally destroyed small scale industries round the globe ,adding up unemployment especially in the developing countries of Asia & africa
Every body is thinking Mr Trum is wrong on imposing tariff, but have you thought about the deficit , do you know what BOP is , no you all dont know and so you think imposing tarrif on sino  goods  is bad idea. today . US is payingo China  800 billion dollar more than what US receives from export to sino. This means this 800 billion dollar is going out of common mans pocket. Free trade policies means not one country become powerful another run in deficit . This is right to impose tariff on china and reduce defficit. Yes peoples will have to face problems , but those are short term In long term it is benefited. Today it is need of time that balance of payment should be maintained or other one country will become stronger and another many will be weaker   .
I agree.
It will be excellent and save world if tariff rates on every chineese products are increased to a minimum of 40 to 50%. it will create lot of opportunities to other part of world.
Honestly, Trump belongs to a group of truly weak people. They can't get it right so they must make false promises to get a momentary head start. And when things don't work out they tear down the whole stage to create a commotion just to cause a distraction from themselves and to make other people feel as bad as he feels within himself. You see it in other senseless acts like the hotel shooter who felt so bad about himself that he had to take other people with him. All for what? Another egomaniac who can't accept his failure. People with a thousand lawsuits who are so arrogant that they think they are above the law and live from one intrigue to the next cause themselves a long trail of enemies, ****on earth and in the after-life. It's just a matter of time before the implosion.
He loves disputes: for any reason; Demanding overtime from his personal driver but stiffing him; Promising golf courses in Scotland/Britain and not pulling through; etc; A trail of broken promises. For What? For the thrill of getting attention. Attention Grabbing Behaviour (AGB). You can see it in children doing anything to get attention, including negative attention. Talks of promise, talks of wishful thinking, Ahhh it feels so good to hear oneself speak those nice juicy promises! .. in one ear, out the other and forgotten. Don't you despise insincere people who invite you and don't follow through?. It's an emotional high from making a new promise .. AGB! He's addicted to the emotional high of getting attention. Addicted to a cocktail of hormones, I call them the '4+' or derivatives of the 4 basic ones: Dopamine, Endorphins, Serotonin, Oxytocin. And one of the derivatives of the basic four is Adrenaline. The adrenaline of telling a lie in the international arena is worth it to him.
trump is a useless president... no productivity only disruptions
Agreed.
Agreed. And the disruption is getting out of hand
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