China exporters struggle to cope with U.S. tariffs

Anna Jefferson
July 15, 2018

In response to Trump's tariffs on Friday, China released a tariff list that will apply to $34 billion worth of USA exports to China. If his administration went ahead with that threat, it would raise the total of targeted Chinese goods to potentially $550 billion - more than the $506 billion that China actually shipped to the United States a year ago.

"This is a fight between unilateralism and multilateralism, protectionism and free trade, might and rules", foreign ministry spokeswoman Chunying Hua told a regular briefing on Wednesday.

The foreign ministry described Washington's threats as "typical bullying" and said China needed to counter-attack to protect its interests.

The S&P 500 also fell 0.7 percent and the Nasdaq Composite dropped 0.6 percent.

The new tariff will go into effect in August after going through a process of public comment and review and a public hearing, which is scheduled for August.

The U.S. Chamber of Commerce has supported Trump's domestic tax cuts and efforts to reduce regulation of businesses, but it has been critical of Trump's aggressive tariff policies.

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World Trade Organization officials are concerned that if the USA and China engage in a tit-for-tat trade war using unilateral domestic laws rather than the WTO's established dispute settlement processes they will undermine the Geneva-based organization's ability to arbitrate global trade conflicts.

The U.S. Trade Representative said Washington is preparing to impose 10 percent tariffs on another $200 billion in Chinese imports, including 6,031 product lines ranging from burglar alarms to electric lamps and fish sticks.

Xu said China exported 54,000 automobiles to the United States last year but that figure will be hit by the tariff in the second half of this year. In a statement, it called the USA actions "completely unacceptable".

In financial markets, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.5 per cent, while the main indexes in Hong Kong and Shanghai fell more than two per cent. There is no victor in a trade war.

"The retaliatory options available to China include boycotting American goods, sharply devaluing the yuan, and selling off U.S. Treasury holdings", wrote Xiao Minjie, senior economist at SMBC Nikko Securities in Tokyo.

There have been no confirmed high-level talks between the world's two largest economies since an early June visit to Beijing by U.S. Commerce Secretary Wilbur Ross that achieved no breakthroughs.

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"Unfortunately the markets haven't come to grips with the current levels of trade policies and tariffs", said Art Hogan, chief market strategist at B. Riley FBR in NY.

The impact of tariffs imposed Friday on the world's second-largest economy should be limited, according to private sector analysts.

In regard to auto parts, Xu said Chinese products are no longer made in the US.

Investors fear an escalating trade war between the world's two biggest economies could hit global growth.

The Aussie, considered a liquid proxy for China-related trades, fell 0.5 per cent against the dollar to US$0.7422.

On Monday, Chinese and German companies including BASF and Volkswagen signed business deals worth 20 billion euros ($23.6 billion) during a visit to Berlin by China's No. 2 leader, Premier Li Keqiang.

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