China vows retaliation for latest $200bn U.S. tariff threat

Thursday, 12 Jul, 2018

"Rather than address our legitimate concerns, China has begun to retaliate against USA products". However, because China exports more to the USA than it imports there are limits on the amount of tariffs Beijing can impose on American goods.

The spiralling conflict over Chinese technology policy threatens to chill global economic growth.

A possible second round of tariff hikes announced Tuesday by the U.S. Trade Representative targets a $200 billion list of Chinese goods.

The planned new tariffs follow the 25 percent imposed on $34 billion in Chinese products, which Beijing responded to by hitting the same amount of USA imports. China, on the other hand, maintained that the country was "forced to strike back to safeguard core national interests and the interests of its people".

But China also faces difficulties in retaliating directly: it ships far more goods to the United States ($506 billion a year ago, according to U.S. figures) than come back in the opposite direction ($130 billion).

The tariffs will not be imposed until after a two-month period of public comment on the proposed list, but some U.S. business groups and senior lawmakers were quick to criticize the move. A final decision will be made August 18, and resulting action will be taken August 31.

But critics argue that despite its attempt to claim the moral high ground as U.S. President Donald Trump threatens to apply more tariffs on Chinese imports, Beijing's recent moves to make it easier for foreign businesses to set up operations also effectively acknowledges that it has had discriminatory market barriers.

By expanding the list, the administration is beginning to hit products that USA households buy, including such things as electric lamps and fish sticks.

Hours after the announcement was released, China's Ministry of Commerce issued its own statement, expressing a "solemn protest" against the United States. He directed Lighthizer to identify $200 billion in Chinese goods for tariffs if China retaliated against U.S. penalties that are meant to punish the country for intellectual property theft.

Instead, its heavily regulated economy gave Beijing tools to disrupt operations for American auto makers, restaurant chains and other companies that are looking to China to drive revenue growth. Regulators can deny or cancel licenses or launch lengthy tax, environmental or anti-monopoly investigations.

Companies are watching US chipmaker Qualcomm Inc., which has waited for months for Chinese regulators to decide whether to allow its proposed $44 billion acquisition of NXP Semiconductors.

For Qualcomm, an acquisition deal that was reportedly approved by Chinese authorities earlier this year might be in jeopardy, as Bloomberg noted today. "The negative impact of the trade friction has already appeared".

China' s Ministry of Commerce said that the tariffs are "totally unacceptable" and it is hurting the entire world, as well as China.

"When exposing and criticizing American words and actions, be careful not to link it to Trump and instead to aim it at the US government", a memo based on verbal instructions from government officials reads.

Senate Finance Committee Chairman Orrin Hatch called it "reckless", adding that the tariffs were "not a targeted approach".

Although the trade war obviously remains front and centre in the minds of investors, another factor at play is the nagging worry that Trump may want to pull the US out of NATO (the North Atlantic Treaty Organisation) - a move that would represent a fundamental upheaval in the worldwide order, and have a huge impact on markets.