China promises to hit back if US President Donald Trump imposes new tariffs

Additional 10 per cent levy on billions in Chinese goods comes just days after White House endorses 25 per cent tariff

PUBLISHED : Tuesday, 19 June, 2018, 8:46am
UPDATED : Wednesday, 20 June, 2018, 10:57am

China has vowed to retaliate with quantitative and qualitative measures if the United States goes ahead with its additional tariff plan against Beijing.

The Ministry of Commerce said the new threat from US President Donald Trump of imposing tariffs on US$200 billion worth of Chinese products was an act of “blackmail”, which was against earlier agreements and disappointed the international community.

“If the US side loses sanity to launch the list, China will be forced to take comprehensive measures combining both quantitative and qualitative ones as a powerful hit-back,” the ministry said in a statement on Tuesday.

Shi Yinhong, a professor of international relations at Renmin University of China in Beijing, said the world’s two largest economies are now in “a semi economic cold war”, and Beijing faces a challenge of bringing back Trump to the trade negotiation table.

“China can make compromises of boosting imports from the US, lowering market entrance for US businesses … but it’s hard for China to make compromises on the structural level such as significantly reducing the state role in economic activities,” Shi added.

Louis Kuijs, Head of Asia Economics at Oxford Economics, wrote in a note that “China will run out of ammunition sooner than the US” in terms of import tariffs because China’s imports of US goods are smaller than US imports of Chinese ones.

At the same time, “history shows that there are various other measures [China] could take to inflict pain on US companies, especially those present in China, including scaled up health, safety and tax checks, delaying the imports of goods, and boycotts of US goods,” Kuijs added.

Trump announced a plan to target US$200 billion worth of Chinese imports with a 10 per cent punitive tariff, raising the stakes in Washington’s stand-off with Beijing over its trade and investment policies.

Trump’s new tariffs would be on top of a 25 per cent levy on Chinese imports announced on Friday and due to go into effect next month. The earlier move prompted Beijing to announce equivalent action on imports from the US, defying Trump’s warning that he would take stronger measures if China retaliated.

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“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Trump said in a White House announcement. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.

“This latest action by China clearly indicates its determination to keep the United States at a permanent and unfair disadvantage, which is reflected in our massive US$376 billion trade imbalance in goods.”

Trump said he had directed US Trade Representative Robert Lighthizer to start drawing up a list of Chinese products to be covered by the 10 per cent levy. This phase of US tariffs would then be applied “if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced” on Friday.

If the 10 per cent tariffs went into effect and China retaliated with more measures, Trump would respond by identifying yet another US$200 billion worth of Chinese imports for extra tariffs, the White House said.

The escalating tariff measures appear to have undone attempts, through high-level talks in Washington and Beijing in recent weeks, to avert a trade war between the world’s two largest economies.

The third such meeting, led by US Commerce Secretary Wilbur Ross and Chinese Vice-Premier Liu He, wound up on June 3 without any breakthroughs or agreements. Earlier rounds were led by US Treasury Secretary Steven Mnuchin and Liu He.

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US Secretary of State Mike Pompeo and his counterpart Wang Yi remained far apart on trade and investment when the two met in Beijing last week. Pompeo warned that the trade deficit between the two countries was “still too high”, prompting Wang to caution against unilateral action and urged Washington to halt military help to Taiwan.

Back in the US, Pompeo hardened his rhetoric against China.

“We’re taking a really hard line on foreign practices that harm America. Whether that’s threatening our technology leadership through intellectual property theft or forced technology transfer, we are hard at ensuring that we protect American property,” Pompeo said.

“Everyone knows today that China is the main perpetrator. It’s at an unprecedented level of larceny. I was with President Xi on Thursday night. I reminded him that that’s not fair competition.

“Chinese actors also continue to conduct cyber activity, so they’re not just taking it by forced technology transfer or stealing it by way of contract, but committing outright theft. We have an enormous responsibility, each of us, to work to stop it.”