China vows to retaliate after Trump’s $200 billion tariff hit

On Sunday Sept. 16 2018 a driver looks out from his trishaw decorated with an American flag and Chinese flags in Beijing

On Sunday Sept. 16 2018 a driver looks out from his trishaw decorated with an American flag and Chinese flags in Beijing. Andy Wong—AP

The Trump administration will impose tariffs on $200 billion more in Chinese goods starting next week, escalating a trade war between the world's two biggest economies and potentially raising prices on goods ranging from handbags to bicycle tires. But Beijing has other ways to retaliate.

In a statement announcing the new round of tariffs, Mr Trump warned that if China takes retaliatory action against USA farmers or industries, "we will immediately pursue phase three, which is tariffs on approximately $267bn of additional imports".

The green light for the tariffs initially dragged US stocks lower, fueling drops in the Chinese yuan in offshore trading and gains in the dollar index.

The two countries have already imposed import taxes on Dollars 50 billion worth of each other's goods. "We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly".

China is the largest exporter by far to the US of the rare earth elements, accounting for about 60 per cent of the US$234.4 million worth of materials imported to America a year ago, according to data from the US International Trade Commission.

Apple shares fell 2.6 per cent, amid concerns it might be caught in the middle of an escalating trade war.

The officials told reporters the lower initial tariff rate would give U.S. businesses time to find new suppliers. The duties take effect September 24 at a 10 percent rate. But he lowered the proposed duty rates back to 10 percent after announcing last month that they should be increased to 25 percent.

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The phase-in was created to give US companies more time to adjust their supply chains, according to senior administration officials.

Tim Stratford, former assistant USA trade representative and managing partner of the global law firm Covington's Beijing office, predicted at a World Economic Forum panel in Tianjin on Tuesday that the conflict would see no victor soon.

Beijing has retaliated in kind, but some analysts and American businesses are concerned it could resort to other measures such as pressuring US companies operating in China.

Other officials who advise the country's leaders are suggesting China impose limits on the sale of parts and supplies needed by US businesses, using "export restraints" to threaten their supply chains.

China's Finance Ministry said its tariff increases are aimed at curbing "trade friction" and the "unilateralism and protectionism of the United States".

Mr. Trump often touts his great relationship with Chinese President Xi Jinping and insists there is a deal to be made that benefits both countries.

Trump has also complained about America's gaping trade deficit - United States dollars 336 billion a year ago - with China, its biggest trading partner.

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The administration teed up the steep new duties months ago.

USA business groups reacted angrily to the announcement, saying the tariffs would raise consumer prices and threaten jobs.

On the contrary, Trump has picked fights with each of those trading partners - from imposing tariffs on imported steel and aluminum to demanding that Mexico and China transform the North American Free Trade Agreement into a deal more favourable to the United States. Officials said the United States would continue trade negotiations only if the Chinese were "serious" about giving ground on those issues.

On a panel at meetings of the World Economic Forum in Tianjin, Fang Xinghai, vice chairman of China's Securities Regulatory Commission, said China won't be pressured by Trump's trade tactics and talked up the economy's strength.

At the same time, the administration said it remains open to negotiations with China. Monday's announcement means almost half of all goods imported from China will be subject to tariffs.

But demand for Chinese products on American soil has jumped amid rising tensions: The latest census data, released Wednesday, showed the USA goods deficit with China this year has grown about 8 percent to $234 billion from the same time last year.

The Trump administration in July and August already imposed 25% tariffs on $50bn on Chinese goods, sparking in-kind retaliation.

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However, some products that help computer networks operate, such as routers, will remain on the new list, the official said. USA business groups reacted angrily to the announcement, saying the tariffs would raise consumer prices and threaten jobs.

In an earlier round of tariffs on $50 billion of goods, the Trump administration removed proposals on flat-panel television sets for the final list in June.

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