Published: Wed, July 11, 2018
Money | By Armando Alvarado

China Hits Back at U.S. Trade Offensive

China Hits Back at U.S. Trade Offensive

The Trump administration contends that China has deployed predatory tactics in a push to overtake US technological dominance. It's very hard for American companies in the auto sector or in financial services to sell into the China market, because there's a lot of regulatory barriers.

A report by New York-based Rhodium Group, a research consultancy, in April showed that Chinese restrictions on foreign investment are higher in every single sector save real estate, compared to the European Union, while numerous big Chinese takeovers in the bloc would not have been possible for EU companies in China.

Noting reports that the U.S. could add a tax on essentially every product shipped from China, Gao said that using the tariff stick to bully on trade runs against the trend of the times.

US President Donald Trump gestures during a Make America Great Again rally in Great Falls, Montana, U.S., July 5, 2018. The administration contends that USA industrial leadership will be eroded by Beijing's strong-armed drive to achieve technological supremacy in such fields as robotics, biotech and artificial intelligence.

China on Friday struck back against U.S. President Donald Trump's trade offensive, intensifying the expanding and unpredictable dispute between the world's two largest economies.

According to the Petersen Institute of International Economics more than 90% of the products on the USA tariffs list are made up of intermediate inputs or capital equipment.

Retaliatory measures "took effect immediately", said a Chinese foreign ministry spokesman, Lu Kang. These include soybeans and automobiles.

Among other energy products, China noticeably spared US liquefied natural gas (LNG) exports from potential import tariffs, but in doing so, it has preserved a potential weapon should the trade war with Washington deepen.

According to DBS's chief economist Taimur Baig, an all-out trade war could shave 0.25% off the GDP of both economies this year.

Noting reports that the U.S. could add a tax on essentially every product shipped from China, Gao said "using the tariff stick to bully on trade runs against the trend of the times".

Global markets initially wobbled at the news but soon forged higher with Wall Street finishing up solidly on bullish employment numbers while Asian and European stocks also cast aside their worries, at least for now.

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The Dow Jones Industrial Average rose 99.74 points, or 0.41 percent, to 24,456.48, the S&P 500 gained 23.21 points, or 0.85 percent, to 2,759.82 and the Nasdaq Composite added 101.96 points, or 1.34 percent, to 7,688.39.

Tokyo closed 1.1% higher, but Hong Kong fell 0.5% in late trading.

The conflict between the world's two biggest economies reflects chronic tension in their relationship as customers, business partners, and increasingly competitors.

Beijing has announced changes this year including easing limits on foreign ownership in insurance and some other fields.

While China accused the United States of "opening fire" on the world, with the tariffs set to take effect today, USA stock indexes rose, even with no evidence of last-minute negotiations between U.S. and Chinese officials.

On Thursday, Trump told reporters aboard the Air Force One that the first wave of that tariffs would quickly be followed by levies on another $16 billion of Chinese goods.

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 past year.

The Chinese currency, the yuan, has dropped 3.5 percent against the USA dollar over the past month, giving Chinese companies a price edge over their US competition. The administration has placed "these import taxes squarely on the shoulders of manufacturers and by extension consumers", Souhrada said.

"This is a potential concern for the outlook of corporate investment and consumption around world", Hui said.

The official newspaper China Daily accused the Trump administration of "behaving like a gang of hoodlums" who could do damage to the global economy unless other countries stop them.

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