Published: Thu, July 12, 2018
Money | By Armando Alvarado

China vows retaliation for US$200B U.S. tariff threat

China vows retaliation for US$200B U.S. tariff threat

The escalation of US tariffs on China comes in the wake of American trade battles with Europe, Canada, and Mexico and amid President Donald Trump's visit to Brussels for a North Atlantic Treaty Organisation summit.

According to the US, China uses predatory practices in a push to challenge American technological dominance - and allegedly forces American companies to hand over technology in exchange for access to the US market. Wednesday's strong flows into the dollar/yen trade continued a trend that began after the United States last week reported decent employment data and a pickup in wages.

The Wall Street Journal, citing unnamed Chinese officials, said Beijing was considering steps including holding up licences for U.S. companies, delaying approvals of mergers involving United States firms and stepping up border inspections of American goods.

A Commerce Ministry statement said, "It is totally unacceptable for American side to publish a tariff list in a way that is accelerating and escalating". "There is no justification for such action", he said in a statement.

An all-out trade war with China could affect a third of all US imports, data from Deutsche Bank Torsten Slok show. High-level talks between the two countries starting in May failed to deliver a breakthrough to head off a trade war.

Farmer Terry Davidson walks through his soy fields July 6, 2018, in Harvard, Illinois, the same day China imposed retaliatory tariffs aimed at the USA soybean market.

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Washington on Tuesday announced it was starting the process to slap 10-percent tariffs on another $200 billion in Chinese export goods as soon as September. Rather than address our legitimate concerns, China has begun to retaliate against US products. The US has suggested that it may ultimately impose tariffs on $500 billion worth of Chinese goods, or roughly the entire amount of US imports from China.

The latest round of proposed tariffs come a few days after the US government unveiled procedures for companies to apply for exclusions from the first round of tariffs, which went into effect July 6. China immediately responded with $34 billion worth of tariffs on American-made goods in retaliation.

Some US business groups and senior lawmakers sharply criticised the latest action on Tuesday, with Senate Finance Committee Chairman Orrin Hatch, a Republican, saying it "appears reckless and is not a targeted approach".

He directed Lighthizer to identify $200 billion in Chinese goods for tariffs if China retaliated against USA penalties that are meant to punish the country for intellectual property theft.

'We can not turn a blind eye to China's mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy'. They are meant to put pressure on China to stop stealing US companies' trade secrets and forcing them to hand over intellectual property to Chinese firms as a condition of doing business there. The prospect of an global trade war has sent jitters through world markets. "It will also result in retaliatory tariffs, further hurting American workers", a Chamber spokeswoman said. In contrast, the US S&P 500 has so far fallen by much less.

Because China imports fewer goods from the USA than the US imports from China, it is unable to match USA tariffs in value, according to a report from Mizuho Bank.

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