China plans tariffs on US$60B of imports to counter Trump

Donald Trump

The Trump administration is proposing raising tariffs on $200 billion of Chinese imports to 25% from an originally planned 10%.

Meanwhile, the Information Technology Industry Council, which represents major IT users like Google, Facebook and Microsoft, immediately called the move by the administration "irresponsible, counterproductive", and said it would "only do more harm to Americans across the country". It said retaliatory duties of between 5 and 25 per cent will be imposed on 5,207 products "if the USA side persists in putting its tariff measures into effect".

The United States has already imposed 25% tariffs on Chinese goods worth $34 billion. Officials in Beijing have vowed to respond with the same amount of tariffs on US products. In this scenario, to which Moody's assigns a 60% probability, USA gross domestic product would be reduced by about 0.1 percentage point at the peak of the trade confrontation, in mid 2019.

Lighthizer told reporters on Wednesday that the additional tariffs are necessary because the original duties did not prompt China to change its trade policy. But they have rejected changing technology development plans they see as a path to prosperity and global influence.

China's new threat targeting a smaller amount of US goods reflects the fact that Beijing is running out of products for retaliation due to its lopsided trade balance with the United States.

Talks on a new NAFTA began nearly a year ago but got bogged down over the Trump team's insistence on measures that would discourage investment in Mexico and shift auto production to the United States. The decision may come as a result of reports that the trade war is hurting the Chinese economy, while so far the impact on the USA has been limited-a fact reflected by a buoyant stock market, low unemployment, and acceleration of wage gains.

China's government, however, shows no sign of bending to Washington's pressure.

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General Electric (GE.N) estimated the new tariffs on its imports from China could raise its costs by $300 million to $400 million overall, before steps to lessen the impact while General Motors Co (GM.N), Ford Motor Co (F.N) and Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) have lowered their full-year profit forecasts. A fall in exchange rates could neutralise the United States tariffs by making Chinese goods cheaper for overseas customers to buy.

- China yet to retaliate but Dollars remains bid, risk assets lower.

In addition, the U.S. claims that China is stealing intellectual property despite the practice having been tolerated since China entered the World Trade Organization (WTO). There have been no formal talks between Washington and Beijing over Trump's demands for weeks.

While American and Chinese officials have hinted at the possibility of restarting talks in recent weeks, it's been nearly two months since they last held high-level negotiations.

In response to the announcement, Geng Shuang, a spokesman for the Chinese Foreign Ministry said Beijing was standing its ground in the trade dispute, reports CNN.

Camuñez notes that the Trump administration has given mixed signals about how tough it's willing to be with China, and that has complicated efforts to resolve the conflict. Container imports at the Port of Oakland reached all-time highs in June.

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