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US-China trade war
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US President Donald Trump has threatened to move to “phase three” if China retaliates. Photo: Bloomberg

US-China trade war heats up as Beijing hits back at US President Donald Trump’s new tariffs

Beijing retaliates with duties on US$60 billion of US goods due to come into effect on Monday

China has hit back at fresh US tariffs on Chinese goods, announcing its own additional duties on US$60 billion worth of American imports as the trade war escalates between the world’s two biggest economies.

The new tariffs – of 5 per cent and 10 per cent – will come into effect on September 24, the same day as the US’ new duties, the Chinese Ministry of Finance said in a statement on Tuesday.

Beijing’s retaliation came after US President Donald Trump announced that the US will start to charge 10 per cent tariffs on US$200 billion worth of Chinese products from next Monday, significantly widening the scope of a trade war. These tariffs will then rise to 25 per cent on January 1.

Trump also threatened that if China retaliated this time then the US would “immediately pursue phase three”, which would mean imposing further tariffs on another US$267 billion worth of products – covering almost all Chinese exports to the US.

China’s Ministry of Commerce said earlier on Tuesday it would be forced to take “synchronised countermeasures” to defend its own interests against the latest US tariffs.

In a statement on Tuesday, the ministry said the tariffs announced by Trump a day earlier had “added new uncertainties” to talks between the two sides. It also said China hoped the US side could “be aware of possible negative consequences from such bad behaviour”.

Trump showed fury at retaliation from Beijing.

“China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me,” he wrote on Twitter.

Chinese foreign ministry spokesman Geng Shuang said Beijing could not accept the “unilateral trade action and protectionism of the US” and China would announce specific measures against US imports at an appropriate time.

A government source said the latest tariffs had ruined the conditions for trade talks in Washington next week and China was reviewing plans to send a delegation headed by Vice-Premier Liu He.

The source said Beijing had tentatively decided to send Liu to Washington on September 24 – the day the new tariffs will come into effect.

In Beijing, Geng said dialogue and consultation must be conducted “on the basis of equality, integrity and mutual respect” and the US must show “sincerity or goodwill”.

China’s yuan weakened on Tuesday while China’s economic planning agency in Beijing pledged to speed up infrastructure spending to cushion the economic slowdown.

Standard Chartered chief China economist Ding Shuang said trade tensions between the two economic giants were expected to last and there was only a small chance that Beijing and Washington would find a quick solution to the conflict.

But Trump’s decision to impose 10 per cent tariffs from next week before raising them to 25 per cent next year might offer some time for the tensions to ease, he said.

“There is still chance for talks before the White House increases tariffs to 25 per cent, but Trump doesn’t seem to want any serious negotiation with Beijing before the US midterm elections [in November],” Ding said.

In a research note, Iris Pang, Greater China economist at ING Bank, said it had become even harder for China to return to the negotiation table.

Pang said Beijing might delay talks until after the elections and try to manage the economic fallout through domestic pro-growth policies.

One of Trump’s biggest bones of contention is China’s “unfair trade practices”, from alleged theft of technologies from US businesses to government support for state-owned enterprises.

But Beijing said the US moves against Chinese products violated trade rules and were part of a strategy to thwart China’s development.

Nick Marro, an analyst at The Economist Intelligence Unit, said Trump’s tariffs “will not be enough to convince China to alter its long-term economic policy” and that “there is a high risk for further escalation” in the trade war.

Natixis economist Alicia Garcia Herrero said the escalating trade war could benefit some European companies and that Europe was more likely to side with the US.

“If the European Union were obliged to take sides, the US market [would] continue to be more relevant for Europe,” Herrero said. “Beyond Europe’s historical alliance with the US ... European exporters have more to lose from the US, which will not help China lobby European governments to remain open to China.”

Additional reporting by Sidney Leng

This article appeared in the South China Morning Post print edition as: tariffs slapped on US$60b worth of U.S. importsTariffs on US$60b worth of US imports
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