China strikes back at US with new tariffs on US$75 billion in goods

China strikes back at US with new tariffs on US$75 billion in goods

FILE PHOTO: U.S. flag on an embassy car is seen outside a hotel in Shanghai
FILE PHOTO: A U.S. flag on an embassy car is seen outside a hotel near a construction site in Shanghai, China, July 31, 2019. REUTERS/Aly Song

WASHINGTON/BEIJING: US President Donald Trump on Friday (Aug 23) said he has ordered American companies to exit China after Beijing unveiled retaliatory tariffs on US$75 billion in US goods, throwing a new twist into the bitter trade war between the world's two largest economies.

Trump said on Twitter he will issue a response to China's latest tariff plan on Friday afternoon. The president was meeting with his trade team at midday, a senior White House official told Reuters.

"We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP," Trump tweeted.

"Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA."

It's unclear what legal authority Trump would be able to use to compel US companies to close operations in China or stop sourcing products from the country.

The US president said he also was ordering shippers including FedEx. Amazon.com Inc, UPS and the US Postal Services to search out and refuse all deliveries of the opioid fentanyl to the United States.

China on Friday said it would impose retaliatory tariffs on US$75 billion of US goods, targeting crude oil for the first time and renewing punitive duties on American-made autos.

The latest salvo was in response to Trump's plans to impose 10 per cent tariffs on a final US$300 billion list of Chinese-made consumer goods on Sep 1 and Dec 15, including cell phones, toys, laptop computers and clothing.

China's Commerce Ministry said that on those same dates it will impose additional tariffs of 5 per cent or 10 per cent on a total of 5,078 products originating from the United States including agricultural products such as soybeans, beef and pork, as well as small aircraft. Beijing is also reinstituting tariffs on cars and auto parts originating from the United States that it suspended last December as US-China trade talks accelerated.

"China's decision to implement additional tariffs was forced by the US's unilateralism and protectionism," the ministry said in a statement.

US stocks fell sharply on fears escalation of the trade war could tip the US economy into recession. The tech-heavy Nasdaq Composite was down 2.2 per cent, the S&P 500 index fell 1.8 per cent and the Dow Jones Industrial Average shed 1.7 per cent. US Treasury yields also fell as investors sought safe-haven assets.

US crude futures were down more than 3 per cent.

White House trade adviser Peter Navarro told Fox Business Network that US-China trade talks would nevertheless continue in September and dismissed the Chinese tariff threat as small in terms of the US economy.

On Thursday, top White House economic adviser Larry Kudlow said there was progress in a deputy-level US-China trade call this week. But neither side so far appears to be ready to make a significant compromise needed to end the nearly 14-month trade war.

The protracted dispute has stoked fears about a global recession, shaking investor confidence and prompting central banks around the world to ease policy in recent months.

In an interview on CNBC, Federal Reserve Bank of Cleveland President Loretta Mester said she viewed the Chinese retaliatory tariffs as "just a continuation" of the aggravated trade policy uncertainty that has begun weighing on US business investment and sentiment.

AGRICULTURE, AUTO SECTORS HIT

The knock-on effects of the US-China trade dispute was a key reason behind the Fed's move to cut interest rates last month for the first time in more than a decade.

"It is unclear as things stand whether the US-China trade negotiations will continue as planned in early September," said Agathe Demarais, global forecasting director at the Economist Intelligence Unit, in an e-mail statement.

"All eyes will now turn to the US Fed to see whether Jerome Powell, the Fed Chairman, will react to these developments by accelerating rate cuts."

In a keynote speech at the Fed's annual central banking conference in Jackson Hole, Wyoming, on Friday, Powell said the US central bank would "act as appropriate" to keep the economy healthy but did not say how fast it might cut rates.

Among US goods targeted by Beijing's latest tariffs were soybeans, which will be hit with an extra 5 per cent tariff starting Sep 1. China will also tag beef and pork from the United States with an extra 10 per cent tariff.

China is also reinstituting an additional 25 per cent tariff on US-made vehicles and a 5 percent tariff on auto parts that had been suspended at the beginning of the year. Carmakers such as Daimler and Tesla had adjusted their prices in China when the auto and auto parts tariffs had been suspended.

Ford, a net exporter to China, said in a statement it encouraged the United States and China to find a near-term solution.

"It is essential for these two important economies to work together to advance balanced and fair trade," the company said.

Source: Reuters/nc/ec

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