China vowed to retaliate after President Donald Trump threatened tariffs on another $200 billion in Chinese imports, deepening a trade dispute between the world’s two biggest economies.
In an immediate rebuke to Trump, the ministry of commerce in Beijing labeled the move “extreme pressure and blackmail”, and said it would retaliate with counter measures. “If the US loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures and retaliate forcefully,” according to a statement from the ministry on Tuesday, Bloomberg reported.
Markets soured as the trade war deepened. The benchmark index of Chinese stocks fell more than 3%, other Asian share markets declined and US equity futures traded lower, while safe havens including the yen, gold and treasuries climbed. Soybean meal futures jumped.
A statement from the White House Monday evening said Trump had instructed the US trade representative’s office to identify $200 billion in Chinese imports for additional tariffs of 10% and on another $200 billion after that if Beijing retaliates.
“The United States will no longer be taken advantage of on trade by China and other countries in the world,” he said. “We will continue using all available tools to create a better and fairer trading system for all Americans.”
A Major Risk
The developments suggest a deepening trade dispute that the International Monetary Fund has described as one of the biggest risks to global growth. By targeting goods that are finished in China but whose components are often sourced from neighboring South Korea, Japan and Taiwan and more, the US strategy could hurt the economies of America’s allies too.
“The collateral damage from an escalating US-China trade war will be widespread,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. There are dangers for the US economy too. If implemented, Trump’s tariffs would mean a sizable amount of imported Chinese goods would be exposed to new tariffs. Higher prices on imported goods could dampen consumer sentiment and pressure inflation.
“The first $50 billion in tariffs are targeted at machinery and other goods that don’t directly impact consumers,” said Tom Orlik, chief economist at Bloomberg Economics. “Pulling off the same trick with tariffs on $200 billion would be tough to do.”
Orlik said that in the event that China’s exports to the US weaken in the face of tariffs, the government would likely seek to offset the growth impact with a combination of subsidies to support domestic demand and higher infrastructure investment.
The US president last week threatened 25% tariffs on $50 billion in Chinese products and said at the time he would impose even more duties if China retaliated. That retaliation was swift in coming, with a statement from Beijing on Friday that it would “strike back forcefully”.
New Anti-Dumping Duties
The US Commerce Department has determined that Chinese common alloy aluminum sheet products are being sold in the US market at less than fair value and will be subject to preliminary anti-dumping duties of 167.16%, the Aluminum Association said on Monday, according to a Reuters report.
The trade group, which typically announces the findings of commerce anti-dumping and anti-subsidy probes involving aluminum before the agency does, applauded the decision.
“Today’s action by the commerce department is exactly the kind of strong, targeted trade enforcement we need in support of the rules-based global trading system,” Aluminum Association President Heidi Brock said in a statement.
Common alloy aluminum sheet is a flat-rolled product that is used in a variety of applications, from building facades to street signs and trailer bodies.
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