Trump ups ante, threatens tariffs on $100bn of Chinese goods

Hugh Fox
April 7, 2018

But he says the current standoff is not the beginning of a trade war, and that he's "cautiously optimistic that we'll be able to work this out".

Earlier in the week, Beijing announced separate import duties on $3 billion of U.S. goods in response to the Trump administration's duties on all steel and aluminum imports, including from China.

While the broader USA equity market recovered somewhat as the day wore on industrial stocks were still down significantly by late afternoon.

The latest escalation comes after the USA on Tuesday said it would impose 25 per cent duties on $50 billion of imports from China, and China quickly retaliated by listing $50 billion United States of products that it could hit with its own 25 per cent tariffs.

China said Wednesday it would levy a 25 percent tariff on about $50 billion of US imports including soybeans, automobiles, chemicals and aircraft.

"In light of China's unfair retaliation, I have instructed the [United States Trade Representative] to consider whether $100 billion of additional tariffs would be appropriate", the president said in a statement.

The threats come as the Trump administration announced earlier this week tariffs on $50 billion worth of us imports of Chinese goods focused on electronics and appliances.

China tit-for-tat tariffs fuel trade war fears
On Wednesday, Facebook closed with a small decline, but other big tech names such as Apple and Microsoft closed higher. Minnesota alone exports more than $2 billion in soybeans annually, with China as the state's top export market.

What's been lost in some of the coverage is that these are still very much threats, not actions.

President Donald Trump, wanting to protect USA farmers from China's threatened tariffs, may end up pitting his country against many more nations in a trade spat that has hit global markets and anxious the worldwide business community, experts said Friday.

"It is a battle between unilateralism and multilateralism, and between protectionism and free trade as well", Gao said.

While China had strived to move up in the value chain, it was still largely "a country that assembles products rather than innovates and develops the IP behind them", Evans-Pritchard said.

China responded to the announcement by matching it with proposed equivalent tariffs on USA goods should the White House move forward with the plan. "We don't want a trade war, but we are not afraid of such a war", a spokesperson for the Ministry of Commerce told state-run news agency Xinhua on Friday. The US hasn't said when the initial round of tariffs on the $50bn of goods will come into force. But economists warn that the tit-for-tat moves bear the hallmarks of a classic trade rift that could escalate.

Kudlow urged calm, signaling to reporters that the Office of the U.S. Trade Representative - which is part of the White House - was proposing actions that might not happen.

In his statement, Zhang firmly defended multilateralism and said "the United States turns its back on these globally recognised rules and its own commitment".

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Trump tweeted moments later, criticizing the World Trade Organization and suggesting it's "unfair" to the U.S. U.S. crude slipped 0.5 per cent to $63.22 a barrel and Brent was down 0.45 per cent at $68 a barrel. We were badly represented. This could cut costs for US meat companies.

In response to Trump's plan, China imposes similar tariffs on 128 US products, including pork and certain fruits.

"We understand some big-picture concern but it appears to us that the specific proposals from China this morning are calibrated carefully to avoid a major impact on Boeing and are therefore intended more as a message to the USA administration that additional trade barriers will be met with an escalating response", said JPMorgan analyst Seth Seifman.

The escalating tit-for-tat trade actions between the two economic superpowers have roiled global financial markets, as investors anxious about the impact on world trade and growth, hitting equities, the dollar and a range of riskier assets such as copper and boosting safe-havens such as the Japanese yen and gold.

But, he said, "at the end of the day, China's unfair and illegal trading actions are damaging to economic growth, for the US, for China and for the rest of the world".

"I am still optimistic by the way that the Chinese recognize that the rest of the world is on our side".

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