China rejects ‘blackmail’ on eve of United States tariff hike

Clay Curtis
July 6, 2018

It would be impossible for China to match Trump's steeper tariff threats because they exceed the total value of China's imports from the US. China's retaliatory tariffs will become effective "immediately" after the United States acts, according to the customs authority.

Although the first exchange of tariffs is unlikely to inflict much economic harm on either nation, the damage could soon escalate.

Another US$16 billion of goods could follow in two weeks, Trump earlier told reporters, before suggesting the final total could eventually reach US$550 billion, a figure that exceeds all of USA goods imports from China in 2017.

"They have a sizeable feed industry that's dependent on soybeans, the largest swine herd in the world, the largest global aquaculture industry, and are rapidly modernizing their poultry, egg, dairy, and beef industries", said American Soybean Association President John Heisdorffer.

Perversely if China's retaliation included tariffs on USA dairy, meat and wine then we could actually get a bit of a trade boost.

The Trump administration is prepping another $16 billion worth of Chinese export tariffs after a public comment period and hearing scheduled for July 24.

Both countries threatened to levy tariffs this week, however, China said it would not be the first to impose the measures.

Up until recently, China had been simultaneously pursuing the two contradictory tasks of trying to reform the WTO and building a replacement to it, which provided the country with as many choices as possible for flexibly reacting to fast-changing scenarios in worldwide affairs, but the latter goal is now taking precedence following Trump's signals that he'll be downgrading the globalist body's importance in influencing America's new semi-protectionist economic policies that largely run counter to the same rules the U.S. itself originally promulgated.

Gao noted that most of those exports are actually made by USA and worldwide companies in China.

In Beijing, policy makers are digging in for what could be a protracted fight - one they say they won't be the aggressor in.

In the USA, support for the president standing up to China extends to blue-collar Democratic voters who crossed party lines in 2016 to help send Mr. Trump to the White House.

It is unclear how long the trade war will last.

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Cohen says while China does export more to the US, the United States could lose in other ways.

In response, it said, China is "being forced to strike back as necessary".

A USA industry source said: "There is a 99 percent chance that tariffs go into force on Friday". "They also will drive up the cost of manufacturing in the US and risk numerous 1.3 million good-paying manufacturing jobs our industry supports".

Adding to concerns this week was a leaked report suggesting Trump had asked his officials to look at pulling the U.S. out of the World Trade Organisation (WTO) altogether.

Xi's government has expressed confidence China can hold out against US pressure, but companies and investors are uneasy.

Trump has taken an aggressive stance on trade, fulfilling a campaign promise.

Then, in a game of tit-for-tat, the USA plans to impose tariffs of 25 percent on $34 billion of goods from China's aerospace and information-technology sectors - as well as auto parts and medical instruments.

Speaking at a weekly news conference, Commerce Ministry spokesman Gao Feng warned the proposed USA tariffs would hit global supply chains, including foreign companies in the world's second-largest economy. US manufacturers and business groups have said the tariffs could increase their costs and lead to higher prices for consumers.

Asked whether USA companies would be targeted with "qualitative measures" in China in a trade war, Gao said the government would protect the legal rights of all foreign companies in the country.

Under a full-blown trade war in which the US slaps 10 percent tariffs on all other countries and they respond, the economists reckon USA growth would slow by 0.8 percentage point by 2020.

And those caught in the initial line of fire - U.S. farmers facing tariffs on their exports to China, for instance - are already hunkered down and fearing the worst.

"The decision to impose tariffs on Chinese goods will harm American consumers and businesses without addressing discriminatory and systemic Chinese trade practices and policies".

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