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Trade war escalates as China announces tariffs on US imports

Wednesday, September 19, 2018

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BEIJING, China (AP) — The US-China trade war escalated further yesterday, with China announcing retaliatory tax increases on US$60 billion worth of US imports, including coffee, honey and industrial chemicals.

The increases are in response to the US announcing it will impose tariffs on US$200 billion worth of Chinese-made goods starting next week. The tariffs will start at 10 per cent, then rise to 25 per cent on January 1.

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

There was no word on whether China would back out of trade talks it said it was invited to by the US, but a Chinese Commerce Ministry statement said the US increase “brings new uncertainty to the consultations”.

The two countries have already imposed import taxes on US$50 billion worth of each other's goods. President Donald Trump threatened to add an additional US$267 billion in Chinese imports to the target list if China retaliated for the latest US taxes. That would raise the total affected by US penalties to US$517 billion, covering nearly everything China sells to the United States.

The American Chamber of Commerce in China warned yesterday that Washington is underestimating Beijing's determination to fight back.

“The downward spiral that we have previously warned about now seems certain to materialise,” said William Zarit, the chamber's chairman.

At the root of the trade war are US complaints about China's plans to try to overtake US technological supremacy. Those plans include “Made in China 2025”, which calls for creating powerful Chinese entities to compete in robotics and other fields. The US says the plans are based on stolen technology, violate China's market-opening commitments and might erode American industrial leadership.

American companies and trading partners including the European Union and Japan have longstanding complaints about Chinese market barriers and industrial policy. But they object to Trump's tactics and warn the dispute could chill global economic growth and undermine international trade regulation.

Trump has strained relations with potential allies including the European Union, Canada and Mexico by raising tariffs on imported steel and aluminium. He demanded Canada and Mexico renegotiate the North American Free Trade Agreement to make it more favourable to the United States.

Trump has also complained about America's gaping trade deficit — US$336 billion last year — with China, its biggest trading partner.

“China has had many opportunities to fully address our concerns,” Trump said in a statement. “I urge China's leaders to take swift action to end their country's unfair trade practices.”

The trade gap means China will run out of US imports to tax while the US still has plenty of Chinese imports to target. But Beijing has other ways to retaliate. American companies say regulators are already starting to disrupt their operations.

Last week, the American Chambers of Commerce in China and in Shanghai reported 52 per cent of more than 430 companies that responded to a survey said they have faced slower customs clearance and increased inspections and bureaucratic procedures.

The US taxes are targeting Chinese goods that Washington says have benefited from improper industrial policies. Beijing's tariffs have hit soybeans and other farm goods from states that voted for Trump in 2016.

“Contrary to views in Washington, China can — and will — dig its heels in and we are not optimistic about the prospect for a resolution in the short term,” said Zarit of the American Chamber of Commerce. “No one will emerge victorious from this counter-productive cycle.”

In the first two rounds of tariffs, the Trump administration took care to try to spare American consumers from the direct impact of the import taxes. The tariffs focused on industrial products, not on things Americans buy at the mall or via Amazon.

By expanding the list to US$200 billion of Chinese products, Trump may spread the pain to ordinary households. The administration is targeting a bewildering variety of goods — from sockeye salmon to baseball gloves to bamboo mats — forcing US companies to scramble for suppliers outside China, absorb the import taxes or pass along the cost to their customers.

The US government did withdraw some items from its preliminary list of imports to be taxed, including child-safety products such as bicycle helmets. And in a victory for Apple Inc, the administration removed smart watches and some other consumer electronics.

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