US upping the ante but China ‘still has trade war cards it can play’

Beijing still holds trade war retaliation options against Washington even if the US raises tariffs on Chinese goods on Friday, according to Chinese analysts. Chinese Vice-Premier Liu He is expected to arrive in Washington on Thursday for the latest round of negotiations, and he and his team are under immense pressure to prevent further increases in duties on Chinese exports to the United States. At the weekend, US President Donald Trump said he would raise punitive tariffs on US$200 billion of imports from China from 10 per cent to 25 per cent on Friday. That change will take effect on Friday, according to a special filing announced on Wednesday in the US government’s Federal Register. China puts Europe trade deal ‘on back burner’ to put out US tariff fire In a statement, the Chinese Ministry of Commerce said it “deeply regretted” the latest development. It said Beijing “will have no choice but to implement countermeasures” if Washington imposed the higher tariffs, without saying what these measures would be. The US president’s surprise tweet on Sunday roiled the Chinese stock market and caused the biggest single-day loss in three years. But Chinese analysts said Beijing still had an advantage – it could use the potential loss of China’s huge domestic market to rattle Wall Street and Trump’s rural support base. Wang Yong, director of the Centre for International Political Economy at Peking University, said that hitting back with tariffs might not be a good option for China, given that China was running out of US goods to tax, and it would hurt Beijing’s efforts to boost domestic demand. But it had other options to deal with further escalation in the conflict, Wang said. “To increase tariffs would only increase the burden on Chinese customers,” he said. “Instead, China can limit its purchases and stop opening up its market to US firms.” Among the sectors hardest hit under those conditions would be US agriculture, finance, energy and manufacturing, Wang said. US soybean producers are already feeling the impact of tariffs. When the trade war erupted in July, China slapped a 25 per cent tariff on the US crop as part of its efforts to weaken Trump’s support among rural farmers. Chinese customs data released on Wednesday showed that China increased soybean imports in April by 10.7 per cent to 7.64 million tonnes, but most of the cargoes were Brazilian beans and some US shipments were delayed, according to a Reuters report. China has bought about 14 million tonnes of US beans since a truce was reached in December, but another 6 million tonnes of anticipated purchases could be in jeopardy. A statement released by the American Soybean Association on Tuesday said Trump’s announcement was a “worst case” for soybean growers. It called on the Trump administration to hold off on additional tariffs and conclude trade negotiations with China. “After so many threats and missed deadlines for concluding negotiations, this ongoing uncertainty is unacceptable to US farmers,” the association’s president Davie Stephens said. “With depressed prices and unsold stocks forecast to double before the 2019 harvest begins in September, we need the China market reopened to US soybean exports within weeks, not months or longer.” Also at risk are promises that China would take another step in opening its US$44 trillion financial sector, with plans to remove limits on ownership in local banks, scrap size requirements for foreign firms that operate onshore, and allow overseas insurance groups to set up units in China. Trump’s threat raises fears US-China trade talks will unravel Another Chinese trade specialist who advises Beijing said retaliation would be “unavoidable” if Trump went ahead with the tariffs. China could hit back by banning exports of key components, intermediate materials and equipment that US manufacturers depended on for the country’s advanced manufacturing sector. “The trade war will escalate, and China has many cards at its disposal,” the specialist said. “The US is reliant on components manufactured in China and they will not be able to find substitutes for them. This would mean US consumers would suffer.” Both sources said China was banking on the resilience of its economy to weather further trade war hits, saying the US’ long economic expansion had peaked and the country would soon start to feel the pinch. China’s exports shrank in April but imports surprised with their first increase of 4 per cent in five months, indicating that domestic demand rebounded slightly in April. But Kaiyuan Capital managing director Brock Silvers said Beijing might be too optimistic about its bargaining power. “China’s economy has stabilised thanks to its stimulus measures, but new confidence may prove short-lived. The economy is still problematic – Beijing’s massive credit increase may only be a temporary balm – and many analysts have talked about a possible slowdown later this year,” Silvers said. “A waiting game on trade is thus much riskier for China than for the US, where the economy remains extremely robust. “Should China respond with new tariffs, trade talks could go on an extended hiatus. “China’s best bet should still be a quick trade resolution while economic tailwinds continue.”

US upping the ante but China ‘still has trade war cards it can play’

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Beijing has several options to put the squeeze on Washington if new threatened tariffs come into effect, observers say But China could be ‘too optimistic’ about riding out the storm

Beijing has several options to put the squeeze on Washington if new threatened tariffs come into effect, observers say

But China could be ‘too optimistic’ about riding out the storm