Trump warns China not to retaliate against tariff hike

Daniel Fowler
May 14, 2019

"Investors are increasingly anxious an anticipated second-half profit rebound may now evaporate as President (Donald) Trump's threat to tariff the remaining $325 billion in Chinese imports would disproportionately target consumer products like iPhones, thereby posing a greater threat to the consumption-driven U.S. economy", said Alec Young, managing director of global markets research at FTSE Russell.

China's announcement earlier Monday of its plans to raise duties on some $60 billion in American imports starting June 1, defied a call from Trump to resist escalating the trade war.

A commentary in Chinese state-run news agency Xinhua, citing Chinese academics at a think tank over the weekend, said that facing US tariff hike threats, China has adhered to its bottom line, defended national dignity and people's interests. Beijing shot back by raising tariffs on around US$60-billion of USA imports.

In Beijing, a spokesman for the Chinese Foreign Ministry said the country would "never surrender to external pressure".

Mr. Trump, unbowed, said the USA could up the ante by imposing import taxes on another $325 billion worth of Chinese goods.

The trade war between the USA and China escalated on Monday, and new research shows the effects of President Trump's tariff policy could be meaningfully detrimental to the US economy. "We hope the United States will meet China halfway to address each other's legitimate concerns".

Stocks are plunging on Wall Street after China said it would retaliate against the USA with tariffs, escalating a trade dispute that investors had hoped would go away.

"These retaliatory tariffs from China could not come at a worse time for family farmers and ranchers, who are already coping with depressed commodity prices, environmental disasters, and chronic oversupply", Johnson told Newsweek in an emailed statement. President Donald Trump responded by announcing further tariffs against China that went into effect over the weekend.

Rather going through a multilateral organization like the World Trade Organization, which would have allowed China to save face against its biggest rival, Trump has chosen potentially humiliating bilateral talks. "But the latest tariff escalation is far too great a gamble for the US economy". China has the resolution, courage, and confidence to rise to all sorts of challenges, they said.

Trump has accused China of reneging on commitments it made during months of trade negotiations, which Beijing has denied.

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In the middle of the negotiations last week, Trump hiked tariffs on $200 billion of Chinese goods to 25% from 10%.

Forecasters have warned that the USA tariff hikes could set back a Chinese recovery that had appeared to be gaining traction.

The political gains from a trade war may evaporate if US consumers feel the pinch from higher prices on Chinese imports, or if USA farmers complain about lost sales as a result of the Chinese tariffs.

"It's clear that there is a lot of nervousness around the US-China trade negotiations and concern that it's really deteriorating pretty significantly, and that's impacting all areas of markets", said Kristina Hooper, chief global market strategist at Invesco in NY.

An hour before the Tariff Council's announcement, Trump wrote on Twitter that "China should not retaliate" against the latest United States moves.

Trump has said he is in "no rush" to finalize a deal with China.

President Trump said Monday he would meet with presidents Vladimir Putin of Russian Federation and Xi Jinping of China at the G20 summit in Japan this June.

A stumbling block has been US insistence on an enforcement mechanism with penalties to ensure Beijing carries out its commitments.

Beijing matched Trump's earlier 25 per cent tariff on $50 billion of American goods.

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