Published: Thu, July 12, 2018
People | By Leon Thompson

China vows retaliation for $200 billion USA tariff threat

China vows retaliation for $200 billion USA tariff threat

"With the announcement from the U.S on the Chinese tariffs, the reaction on the policy side from China will be the key event to watch in the coming days", said Shinichiro Kadota, senior FX strategist for Barclays in Tokyo.

Rabobank said last week it reckoned China will have to buy 15 million tonnes of USA beans with the new tariff this year because there aren't enough alternative sources of beans from other major exporters, like Brazil and Argentina. It's unclear what that action could include.

White House officials said the president has asked U.S. trade representative Robert Lighthizer to begin preparations for levies of 10 per cent on a host of consumer products, just days after the two economic giants hit one another with $34bn export tariffs.

Washington on Wednesday announced it was starting the process to slap 10-per cent tariffs on another $ 200 billion in Chinese export goods as soon as September.

Oliver Jones from Capital Economics has warned that China's response to Trump's latest tariff threat could hit the U.S. stock market hard. The latest list hits items that US households buy, including electric lamps, apple juice and fish sticks. "There is no justification for such action".

The eventual goal is to impose tariffs on 40 percent of Chinese imports, the same proportion of U.S. goods hit by Beijing's retaliation, an official told reporters. 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.

Yu said China can also buy more rapeseed, sunflower seeds, and bring in more soybean meal, rapeseed meal, sunflower meal and fishmeal to fill any supply gaps.

The list is subject to a two-month public comment period before taking effect.

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Calling Washington's behavior irrational, Beijing warned that the U.S. is, in the first instance, hurting itself with protectionist measures and constant attacks on free trade.

Chinese officials are expected to retaliate in other ways, hitting US firms in China with unplanned inspections, delays in approving financial transactions and other administrative headaches.

European stock markets are expected to follow Asia's lead, as economics warn that a trade war would cause serious economic harm.

However, Stockman said the big problem of trade imbalance is not a result of bad trade deals. "It seems that the U.S. is escalating the scale of this trade friction", said Mr. Li, adding: "The negative impact of the trade friction has already appeared".

In a statement USA trade representative Robert Lighthizer said these new additional tariffs are a result of "China's retaliation and failure to change its practices" after the first round of tariffs.

"Unfortunately, China has not changed its behavior - behavior that puts the future of the USA economy at risk", he continues.

The move drew immediate condemnation from Senate Finance Chairman Orrin Hatch, a Republican from Utah, who called it "reckless" and not "targeted".

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