May 26, 2018

China threatens U.S. with tariffs, says 'not afraid of trade war'

25 March 2018, 12:44 | Yvette Williams

China threatens U.S. with tariffs, says 'not afraid of trade war'

China tells US it will defend interests after Trump tariffs

China will also pursue legal action against the USA at the World Trade Organisation in response to the United States planned tariffs on steel and aluminum imports, the statement said, and called for dialog to resolve the dispute.

Speaking from China, Trade expert Stephen Jacobi says New Zealand businesses shouldn't panic just yet. "But China is not afraid of and will not recoil from a trade war", it said in a statement. "Some people" from the USA are "too arrogant and have misjudged the situation", Chinese foreign ministry spokesperson Hua Chunying said on Friday.

"The US declared a trade war, but China is acting quite restrained".

President Donald Trump signed an executive memorandum that would impose up to $60 billion in annual tariffs on Chinese imports.

"China can sustain pain much longer than the USA can, and it has the ability to harass numerous American companies operating in China". This value is estimated to be "at least $50 billion per year", it added.

"Negative fallout has been limited thus far, consistent with the view that the president's belligerence is merely a starting point for negotiation", said economist Jim O'Sullivan of High Frequency Economics. But shortly thereafter, Canada and Mexico were excluded from the tariffs, even though Canada is the largest country sending metals to the United States.

Before the tariffs become final, there will be a 30-day comment period, the White House said.

Fresh fruit, dried fruit and nuts, wine, modified ethanol, ginseng and seamless steel pipes are among the USA goods that could see a 15 percent duty at stage one, while products such as pork and recycled aluminium face a proposed 25 percent tariff at stage two. Trump, on March 8, signed proclamations to impose a 25 per cent tariff on imported steel and a 10 per cent tariff on aluminium, causing mounting dissent among business groups and trading partners around the world. The tariffs are effective Friday.

The tariffs are meant to address two problems: intellectual property theft by China and a steep and persistent trade deficit. China, in 2017, was the US' second-largest agricultural export market. Trump also directed his officials to pursue a World Trade Organization complaint against China for discriminatory licensing practices.

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The ministry said it will seek public consultation on the proposals before they are implemented.

China's claims in the South China Sea, through which about $5 trillion United States in ship-borne trade passes each year, are contested by Brunei, Malaysia, the Philippines, Taiwan and Vietnam.

The latest actions taken by Washington and Beijing increase the likelihood of a full-blown trade conflict between the two countries, with analysts voicing concern that the moves will add to global trade tensions.

Alarm over Trump's protectionist leanings mounted earlier this month after he imposed hefty import tariffs on steel and aluminum under Section 232 of the 1962 U.S. Trade Expansion Act, which allows safeguards based on "national security".

But the tariffs "will be more counterproductive than helpful to the American economic position", said the historian, who also specializes in global relations. But in a sign that he will still turn to the WTO when it suits his interests, Trump had his government file a complaint through the organization to try to stop China from allegedly stealing technology from US companies that operate there.

Lighthizer said the nation's trade deficit indicates that the global rules on trade sometimes make it hard for USA companies to export. One of them is certainly trade.

Stock markets fell sharply on Trump's announcement, with the Dow Jones Industrial Average falling almost 3 per cent.

"Disrupting trade flows will jeopardise the global economy at a time when economic recovery, though fragile, has been increasingly evident around the world".

The China Council for the Promotion of International Trade, a state-funded trade body, urged the two sides to settle their differences without resorting to open conflict.

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