China retaliates with tariffs on U.S. products worth $50B as markets skid - Action News
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China retaliates with tariffs on U.S. products worth $50B as markets skid

China quickly hit back on Wednesday at the Trump administration's plans to slap tariffs on $50 billion US in Chinese goods, retaliating with a list of similar duties on key American imports including soybeans, planes, cars, whisky and chemicals.

Beijing 'making it clear what the cost would be' in hopes of reaching an agreement, economist says

Wang Yi, China's state councillor and foreign minister, addresses a news conference at the Ministry of Foreign Affairs in Beijing on Tuesday. On Wednesday, China announced new tariffs on U.S. products including soybeans, aircraft and automobiles. (Andy Wong/Associated Press)

China quickly hit back on Wednesday at the Trump administration's plans to slap tariffs on $50 billion US in Chinese goods, retaliating with a list of similar duties on key American imports including soybeans, planes, cars, whisky and chemicals.

The speed with which the trade struggle between Washingtonand Beijing is ratcheting up the Chinese government took lessthan 11 hours to respond with its own measures led to a sharpsell-off in global stock markets and commodities.

Investors are wondering whether one of the worst tradedisputes in many years could now turn into a full-scale trade war between the world's two economic superpowers.

"The assumption was China would not respond too aggressivelyand avoid escalating tensions. China's response is a surprisefor some people," said Julian Evans-Pritchard, Senior ChinaEconomist at Capital Economics, noting that neitherhad yetcalled for enforcement of the tariffs.

"It's more of a game of brinkmanship, making it clear whatthe cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force," hesaid.

This is a real game changer and moves the trade dispute away from symbolism to measures which would really hurt U.S agricultural exports.- Carsten Fritsch,Commerzbankcommodities analyst

Beijing's list of 25 per cent additional tariffs on U.S.goods covers 106 items with a trade value matching the $50billiontargeted on Washington's list, China's Commerce and Finance ministries said. The effective date depends on when theU.S. action takes effect.

Unlike Washington's list, which was filled with many obscureindustrial items, China's list strikes at signature U.S. exports, including soybeans, frozen beef, cotton and other keyagricultural commodities produced in states from Iowa to Texasthat voted for Donald Trump in the 2016 presidential election.

"This is a real game changer and moves the trade disputeaway from symbolism to measures which would really hurt U.Sagricultural exports," said Commerzbank commodities analystCarsten Fritsch.

China's tariff list covers aircraft that would likelyinclude older models like Boeing Co's workhorse 737narrowbody jet, but not newer models like the 737 MAX or itslarger planes. A Beijing-based spokespersonfor Boeing declined tocomment.

Beijing's announcement triggered heavy selling in globalfinancial markets, with U.S. stock futures sliding 1.5 per cent and U.S. soybean futures plunging nearly five per centand on track for their biggest fall since July 2016. The dollar briefly extended early losses, while China's yuan skidded inoffshore trade.

Rapid response

Hours earlier, the U.S. government had unveiled a detailedbreakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25 per cent duties,ranging from light-emitting diodes to machine parts.

The U.S. move, broadly flagged last month, is aimed atforcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forcedtechnology transfer from U.S. companies to Chinese competitors,charges Chinese officials deny.

Foreign Ministry spokespersonGeng Shuang said China had shownsincerity in wanting to resolve the dispute through
negotiations.

"But the best opportunities for resolving the issues throughdialogue and negotiations have been repeatedly missed by theU.S. side," he told a regular briefing on Wednesday.

U.S. President Donald Trump's administration announced Tuesday it would hit China with 25 per cent tariffs on some 1,300 industrial technology, transport and medical products. (Evan Vucci/Associated Press)

The tariff list from the office of U.S. Trade RepresentativeRobert Lighthizer followed China's imposition of tariffs on $3billion worth of U.S. fruits, nuts, pork and wine to protest newU.S. steel and aluminum tariffs imposed last month by Trump.

The publication of Washington's list starts a public comment andconsultation period expected to last around two months.

Will consumers pay?

Many consumer-electronics products such as cellphones madeby Appleand laptops made by Dell were excluded, as were footwear and clothing, drawing a sigh of relief fromretailers who had feared higher costs for American consumers.

A U.S. industry source said the list was somewhat unexpectedin that it largely exempts major consumer grade technologyproducts, one of China's major export categories to the U.S.

"The tech industry will feel like overall it dodged abullet," the source said, but added that traditional industrial goods manufacturers, along with pharmaceuticals and medicaldevice firms, could suffer.

Many U.S. business groups support Trump's efforts to stopthe theft of U.S. intellectual property, but have questioned whether tariffs are the right approach. They warn thatdisruptions to supply chains that rely on Chinese components will ultimately raise costs for consumers.

"Tariffs are one proposed response, but they are likely tocreate new challenges in the form of significant added costs formanufacturers and American consumers," National Association ofManufacturers president Jay Timmons said in a statement.

Algorithm shields U.S. consumers

USTR developed the tariff targets using a computer algorithmdesigned to choose products that would inflict maximum pain onChinese exporters, but limit damage to U.S. consumers.

A USTR official said the list got an initial scrub byremoving products identified as likely to cause disruptions tothe U.S. economy and those that needed to be excluded for legalreasons.

"The remaining products were ranked according to the likelyimpact on U.S. consumers, based on available trade data involving alternative country sources for each product," theofficial, who spoke on condition of anonymity, told Reuters.

The tariff list targeted products that benefit from China'sindustrial policies, including its Made in China 2025program, which aims to replace advanced technology imports with domesticproducts in strategic industries, such as advanced informationtechnology, robotics, and pharmaceuticals.

A man looks at an electronic board displaying stock trading index at a brokerage house in Beijing on Tuesday. Asian stocks fell for a second day amid jitters about U.S.-Chinese trade tensions and mounting public scrutiny of technology companies. (Andy Wong/Associated Press)

Such policies coerce American companies into transferringtheir technology and intellectual property to Chinese enterprises and "bolster China's stated intention of seizingeconomic leadership in advanced technology as set forth in itsindustrial plans,"USTR said.

Many products in those segments appear on the list,including antibiotics and industrial robots and aircraft parts.

USTR did include some key consumer products from China,including flat-panel television sets and motor vehicles, both electric and gasoline-powered with engines of threelitres or less.

A Reuters analysis that compared listed products with 2017Census Bureau import data showed $3.9 billionin flat-paneltelevision imports, and $1.4 billionin vehicle imports fromChina.

Among vehicles likely to be hit with tariffs is GeneralMotors Co's Buick Envision sport-utility vehicle, whichis assembled in China and sold in the United States. Volvo,owned by China's Geely Motors, also exports Chinese-builtvehicles to the United States.

More than 200 products on the list saw no U.S. imports lastyear, including large aircraft and communication satellites, while some categories were highly unlikely to ever be imported,such as China-made "mortars" and "grenade launchers."

USTR has scheduled a May 15 public hearing on the tariffs,which were announced as the result of an investigation underSec.301 of the 1974 U.S. Trade Act.China's Commerce Ministry said Wednesday it has initiated a World Trade Organization dispute procedure against that investigation.

China ran a $375-billion goods trade surplus with the UnitedStates in 2017, a figure that Trump has demanded be cut by $100billion.