China hit back quickly on April 4 against the Donald Trump administration’s plans to slap tariffs to the tune of $50 billion on Chinese goods, retaliating with a list of similar duties on key U.S. imports, including soybeans, planes, cars, beef and chemicals.
The speed with which the trade tussle between Washington and Beijing is ratcheting up, with China taking less than 11 hours to respond with its own measures, has led to a sharp selloff in global stock markets and commodities.
President Trump denied that the tit-for-tat moves amounted to a trade war between the world’s two economic superpowers. “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.,” Mr. Trump wrote in a post on Twitter early on April 4.
Investors were wondering, nonetheless, how far one of the worst trade disputes in many years could escalate.
“China’s response is a surprise for some people”
“The assumption was China would not respond too aggressively and avoid escalating tensions. China’s response is a surprise for some people,” said Julian Evans-Pritchard, senior China economist at Capital Economics, noting that neither side had yet called for enforcement of the tariffs.
U.S.-made goods that appear to face added tariffs in China based, on an analysis of Beijing’s list, include Tesla electric cars, Ford’s Lincoln auto models, Gulfstream jets made by General Dynamics and Brown-Forman Corp’s Jack Daniel’s whiskey.
Unlike Washington’s list, which was filled with many obscure industrial items, China’s list strikes at signature U.S. exports, including soybeans, frozen beef, cotton and other key agricultural commodities produced in States from Iowa to Texas that voted for Mr. Trump in the 2016 presidential election.
Soybeans imported from the U.S. being arranged at a port in Nantong in east China’s Jiangsu Province on March 22, 2018.
While Washington targeted products that benefit from Chinese industrial policy, including its “Made in China 2025” initiative to replace advanced technology imports with domestic products in strategic industries such as advanced IT and robotics, Beijing’s appears aimed at inflicting political damage.
Tobacco and whiskey, for example, are both on Beijing’s list and are produced in States, including Kentucky, home of Senate Majority Leader Mitch McConnell.
“It’s more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force,” said Mr. Evans-Pritchard.
Beijing’s list of 25% additional tariffs on U.S. goods covers 106 items with a trade value matching the $50 billion targeted on Washington’s list, China’s Commerce and Finance Ministries said.
The effective date depends on when the U.S. action takes effect.
“This is a real game changer and moves the trade dispute away from symbolism to measures which would really hurt U.S agricultural exports,” said Commerzbank commodities analyst Carsten Fritsch.
China’s tariff list covers aircraft that would likely include older models such as Boeing Co’s workhorse 737 narrowbody jet, but not newer models like the 737 MAX or its larger planes.
A Beijing-based spokesman for Boeing, the largest single U.S. exporter to China, declined to comment.
Beijing’s announcement triggered heavy selling in global financial markets, with U.S. stock futures sliding 1.5% and U.S. soybean futures plunging nearly 5% and on track for their biggest fall since July 2016. The dollar briefly extended early losses, while China’s yuan skidded in offshore trade.
Rapid response
Hours earlier, the U.S. government unveiled a detailed breakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25% duties, ranging from light-emitting diodes to machine parts.
The U.S. move, broadly flagged last month, is aimed at forcing Beijing to address what Washington says is a deeply entrenched theft of U.S. intellectual property and forced technology transfer from U.S. companies to Chinese competitors. The charges, however, have been denied by Chinese officials.
Foreign Ministry spokesman Geng Shuang said China had shown sincerity in wanting to resolve the dispute through negotiations.
“But the best opportunities for resolving the issues through dialogue and negotiations have been repeatedly missed by the U.S. side,” he told a regular briefing on April 4.
The tariff list from the office of U.S. Trade Representative Robert Lighthizer followed China’s imposition of tariffs on $3 billion worth of U.S. fruits, nuts, pork and wine to protest at new U.S. steel and aluminium tariffs imposed last month by Trump.
Publication of Washington’s list starts a public comment and consultation period is expected to last around two months.
