China trade battle kicks off; markets take it in stride

Sean Reid
July 7, 2018

In the run-up to Friday, there was no sign of renewed negotiations between U.S. and Chinese officials, business sources in Washington and Beijing said.

Speaking at a weekly news conference, Commerce Ministry spokesman Gao Feng warned the proposed USA tariffs would hit worldwide supply chains, including foreign companies in the world's second-largest economy.

Trump has threatened to impose tariffs on some $450 billion of Chinese goods - virtually all of China's exports to the U.S. - as he seeks to advance his "America First" protectionist agenda. A Chinese government spokesman has said Thursday, July 5, 2018, that Beijing "will not bow in the face of threats and blackmail" on the eve of US tariff hikes and will defend its interests.

But Trump has said his administration will respond to retaliation from Beijing with much bigger waves of tariffs, raising the prospect of worsening tit-for-tat reprisals.

Tariffs imposed so far by all sides affect about $60 billion of goods, or 0.3 per cent of world trade, according to Slater.

The Trump administration's first round of duties hits major Chinese technology products, and another round of tariffs on $16 billion worth of goods is set to go into effect as soon as August. Trump said. "So we have 50 plus 200 plus nearly 300".

As a possible follow-up, the U.S. has a public hearing scheduled for July 24 to weigh tariffs on $16 billion worth of Chinese goods including machinery and plastics.

It's also bigger than the $505 billion of goods that the United States imported from China past year.

The tariffs will hurt the American high-tech companies that Trump is trying to protect from intellectual property theft as it becomes increasingly hard for those companies to do business in China, she said. "However, we can't rule out a full-blown, recession-inducing "trade war"," it said. "To put it simply, the U.S. is opening fire on the entire world, including itself". -China trade involves parts and supplies, rather than final goods - so the most immediate effect will be felt by the companies making the products, not the consumers finding them on store shelves.

In a fresh sign of industry´s unease, a business survey on Thursday again showed the United States services sector was already experiencing supply chain interruptions and rising costs in anticipation of heightened trade restrictions. But after three rounds of negotiations between the two sides, including a Chinese pledge to significantly increase purchases of American products, Trump made a decision to go ahead with the tariffs. If the determined to escalate conflicts with China, then so be it.

The US Chamber of Commerce says some states will have billions of dollars worth of exports at risk.

China's tactics were specifically created to hurt Trump supporters, he said.

And enduring the pinch isn't going to pay off. Protectionism has historically proven to be destructive for the global economy and won't achieve what the Trump administration is trying to accomplish, said Hsu.

The start of the trade war also likely confirms the widening rupture between Trump and his own Republican Party, a traditional champion of free trade and big business. "We urge the two governments to come back to the negotiation table". For example, the United States government wants China to rein in government subsidies for policies like "Made in China 2025", which seeks to pump hundreds of billions of dollars into industries such as robotics, electric cars and computer chips with the aim of becoming a global leader.

The new tariffs will bring back a level of American protectionism that has not been seen since 1970 when the average charge stood at 6.5%.

And minutes from the most recent Federal Reserve meeting showed that Fed officials are increasingly anxious about economic harm from the Trump administration's trade policies.

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