China prepares retaliatory tariffs on US imports
Targeting of $3bn of goods seen as show of restraint but prospect of escalation remains
Charles Clover and Lucy Hornby in Beijing and James Kynge in London
© Bloomberg
Beijing signalled its readiness to go toe-to-toe with US President Donald Trump’s campaign of tariffs against China on Friday, proposing new levies on 128 American imports that heightened market fears of a looming trade war between the world’s largest economies.
China’s response to Mr Trump bore the hallmarks of a carefully calibrated warning. Beijing said it was planning tariffs on about $3bn in imports, including a 15 per cent tariff on US steel pipes, fresh fruit and wine, and a 25 per cent tariff on pork and recycled aluminium.
But it also made it clear the measures were in retaliation for US steel and aluminium tariffs announced earlier this month and not the 25 per cent levy on up to $60bn of annual imports from China that Mr Trump unveiled on Thursday — raising the prospect of an even tougher response in the future.
“China’s overall attitude was it never wanted a trade war to begin with,” said He Weiwen, a trade policy expert and former commerce ministry official. “But now that tariffs have been announced, China’s purpose is . . . to stop a trade war from continuing.”
Fears over a tit-for-tat campaign of escalating tariffs between Beijing and Washington rippled though global financial markets, prompting a sharp sell-off in Asia, where Japan’s Nikkei index dropped 4.5 per cent, and a more modest drop in Europe, where Germany’s Dax was down 1.8 per cent.
But US share prices steadied after a sell-off in Thursday’s session, with the S&P 500 index about level in afternoon trade.
In Geneva, the US tariffs met a barrage of criticism at a World Trade Organization meeting attended by the EU, Japan, China and Russia. Roberto Azevêdo, WTO director-general, said that disrupting trade flows will “jeopardise the global economy at a time when economic recovery, though fragile, has been increasingly evident around the world”.
In big US companies too, foreboding was evident. One CEO, who declined to be named but whose company has been investing in China for 20 years, said: “I’m really worried about what retaliatory measures they take.” He added that Mr Trump’s stated aim of taking steps to protect US intellectual property in China “may be a good idea, but not through the front door with headlines and Twitter.”
lex Wolf, a former US diplomat who now works for asset manager Aberdeen Standard Investments, warned that even without raising new tariffs, Beijing could retaliate by compromising the business of US multinationals operating inside China.“
This could put US companies such as Apple, Microsoft, Starbucks, GM, Nike . . . in the firing line,” Mr Wolf said.
Analysts said China’s targeting of a diffuse range of goods and sectors appeared to be a carefully crafted political weapon, a tactic similar to that threatened by the EU in which sectors in the constituencies of pivotal Republicans in Congress are hit to maximise their impact.
“The Chinese made it clear they will not be using a big knife,” said Joerg Wuttke, who served until recently as head of the EU Chamber of Commerce in Beijing. “They will do it Chinese acupuncture style, and take out the needles. And the needles will go into the swing states, into agriculture, anything that is painful for Donald Trump's constituency.”
Shi Yinhong, an international relations professor at Renmin University in Beijing, said China faced a dilemma.“If the revenge is too soft, it might raise the complaints of Chinese people and be unable to stop Trump’s trade war targeted at China,” said Mr Shi.
“If the revenge is too strong, then it might seriously hurt China’s economy and it might make Trump impose more trade sanctions, which would start a trade war.”
Additional reporting by Xinning Liu and Emily Feng in Beijing and Alice Woodhouse in Hong Kong
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