China imposes more tariffs against US, escalates trade war

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Latest targets by China are 106 U.S. products including soybeans, cars and chemicals

Tribune News Service

BEIJING — China on Wednesday announced tariffs on U.S. products worth $50 billion, retaliating against American tariffs on Chinese high-tech goods and sharply escalating a trade war that could damage the global economy.

The Tariff Commission of China’s powerful State Council plans to impose a 25 percent tariff on 106 U.S. products including soybeans, cars and chemicals, according to an announcement by China’s state broadcaster, CCTV. Beijing will also target U.S. corn, cotton, beef, orange juice, whiskey, tobacco, and several lubricants and plastic products. The broadcaster did not announce a timeline for implementation.

The move marks a proportional — yet still dramatic — retaliation against the announcement by the Trump administration on Tuesday of the list of more than 1,300 Chinese products, worth an estimated $50 billion, on which the U.S. intends to impose 25 percent tariffs.

The U.S. Trade Representative’s office called its list a “response to China’s unfair trade practices,” accusing Beijing of the “forced transfer of U.S. technology and intellectual property.” The U.S. tariffs would take effect no earlier than June.

China had immediately vowed a strong response. “America’s measures have violated the rules of the World Trade Organization, and have seriously violated China’s legal rights,” China’s Finance Ministry said in an online statement.

The Chinese response specifically targets politically sensitive areas for Trump —farm-state exports. Many American farmers rely on soybean exports to China — the country purchased $14 billion worth of U.S. soybeans in 2016.

Trump won eight of the U.S.’ top-10 soy-exporting states in his 2016 election, according to the U.S. Department of Agriculture. Wisconsin and Michigan, both crucial swing states in the election, are also major soybean exporters. Analysts say China could make up some of the shortfall by importing from Brazil.

Whiskey, to take another example, is a prime product of Kentucky, the home of Senate Majority Leader Mitch McConnell, who has already expressed reservations about Trump’s tariff policies. Orange juice is heavily produced in Florida, a key swing state.

Beyond the political implications, the trade moves have a wider economic impact. Asian markets, including Hong Kong’s Hang Seng index, fell Wednesday amid trade war fears, suggesting that China’s move was stronger than many investors expected. The Chinese yuan fell 0.4 percent against the U.S. dollar, according to Reuters, its biggest fall against the dollar since mid-March.

The effects were also felt on Wall Street. The Dow opened down nearly 500 on Wednesday morning, and other major indexes also took heavy hits.

“The worry is that this could escalate,” Alberto Gallo, partner and portfolio manager at Algebris Investments in London, told Bloomberg. “Growth momentum has decelerated, there is more geopolitical risk.”

The trade war between the U.S. and China has two fronts. The first is already well underway: On March 8, the Trump administration announced global steel and aluminum tariffs to protect U.S. producers. China shot back by levying 15 percent to 25 percent tariffs on $3 billion worth of American goods, including scrap aluminum, frozen pork, dried fruits, nuts and wine.

The second battle, involving U.S. claims of unfair Chinese actions targeting intellectual property, began on March 22 with Trump’s order to trade officials to draw up a list of Chinese products to hit. Those import taxes, announced Tuesday, target a wide array of Chinese technology, transport and medical products, including flat-screen TVs, air-combat simulators, bookbinding machines, centrifuges, malaria test kits, x-ray machine parts and flamethrowers.

Even as both sides ramp up the pressure, there are signs that talks between the two economic rivals are continuing. Some analysts believe that limited concessions from China may be enough to launch formal negotiations.

“I would say the pattern being established is that if trade partners make small concessions that the administration can trumpet, that seems to be sufficient,” said David Dollar, a senior fellow in the John L. Thornton China Center at the Brookings Institution.

Some Chinese commentators, however, suggested that Beijing considered the U.S. move a serious political provocation and would be reluctant to back down.

“A growing number of Chinese are beginning to believe that Donald Trump is not simply fighting a trade war, but is trying to wipe out China’s capabilities to innovate new tech while rallying allies to contain China’s rise,” Hu Xijin, editor in chief of the state-run Global Times tabloid, said in a video.

“Many have further concluded that it is imperative to demoralize the Trump administration at all costs and make it suffer for its erroneous policy toward China.”

Trump on Tuesday again suggested that his tariffs are meant to pressure Beijing to come to the table and make concessions.

“We’ll be working with China, we’ll be negotiating with China,” Trump said, repeating his “great respect” for Chinese President Xi Jinping.

“We intend to get along with China, but we have to do something very substantial” on trade, Trump said.

In the past the president also has said that he would be willing to cut China some slack on trade if Xi helped put more economic pressure on North Korea to rein in its nuclear program. Trump is planning to meet with North Korean leader Kim Jong Un in May for what would be an unprecedented summit.

“I think Xi is in a stronger position,” said Nicholas Lardy, a China expert at the Peterson Institute for International Economics, referring to Xi’s recent meeting with Kim in Beijing and the implications from their restored relations. The Chinese president “now has a working relationship with Kim,” Lardy said, “and implicitly the threat must be, ‘If you put all those tariffs on us, we’re not going to cooperate with shutting down North Korea economically.’”

If negotiations fail to head off the confrontation, a broader trade war could have major effects on U.S. businesses.

Consider wine, for example: California’s wine makers were livid at the Chinese tariffs’ expected impact on Golden State exports. U.S. wine is popular in China, especially bottles from California, which has a certain cultural cachet in the country. China imported $82 million of American wine last year.

The tariffs will effect only a small amount of U.S. wine The Tariff Commission of China’s powerful State Council plans to impose a 25 percent tariff on 106 U.S. products including soybeans, cars and chemicals, one of every 250 bottles produced in the U.S. goes to China, Jim Boyce, a Beijing resident who has been covering the country’s wine culture for a decade, wrote on his blog, the Grape Wall of China.

“Then again, the issue in China is often less about current buyers and more about potential buyers, the dream of moving toward a market where a billion people one day vociferously scream for Screaming Eagle,” he wrote, referencing the esteemed California winery.

The tariffs could be a major boon to wine producers in Chile, New Zealand and Australia, who have free-trade deals with China.

“There are many types of California wine available in China, and they were cheap,” said Li Li, 32, a saleswoman in Beijing. “But Californian wine isn’t the only choice if one is into new-world wines The Tariff Commission of China’s powerful State Council plans to impose a 25 percent tariff on 106 U.S. products including soybeans, cars and chemicals, you’ve got Chilean, South African and Australian wines, with good value and taste. I think more Chinese people will switch to wines from these countries after the tariffs are imposed.”

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