Trump's $200 billion China threat wobbles European, hurts Asian stocks

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19 September, 2018

"China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers due to their loyalty to me", Trump said on Twitter. The White House pledged to immediately pursue further tariffs on around $267 billion of Chinese imports if the country retaliates.

China announced $60 billion in retaliatory measures on Tuesday, which included a 10 percent tariff on imported LNG from the United States.

The increases are in response to the USA announcing it will impose tariffs on $200 billion worth of Chinese-made goods starting next week.

A senior Chinese securities market official said United States trade actions will not work as China has ample fiscal and monetary policy tools to cope with the impact.

The tariffs are meant to punish China for alleged unfair trade practices, including intellectual property theft.

The new tariff measures will take effect on September 24, the date when the Trump administration says it will begin to levy new tariffs of 10 percent on $200 billion of Chinese products.

The latest round of imports will face 10 percent tariffs through the end of the year, and then the rate will jump to 25 percent.

The tariffs also put retailers in a tough position.

Oxford Economics said in a note that its baseline forecast for Chinese GDP in 2019 could fall well below 6 percent, and said prospects for near-term easing in tensions were low.

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The announcement brings clarity to an issue that the industry has anticipated mostly with concern due to the impact such tariffs could ultimately have on their businesses and consumers over the long term.

Distance Beijing Heaping more duties on Chinese goods will only further distance Beijing from resolving the conflict through a negotiated solution, said one of the people.

Geng said China would like to work with the U.S. to achieve that, adding that "however the protectionist and unilateral measures taken by U.S. were not acceptable to us". The administration is targeting a bewildering variety of goods - from sockeye salmon to baseball gloves to bamboo mats - forcing USA companies to scramble for suppliers outside China, absorb the import taxes or pass along the cost to their customers.

"The Chinese side has repeatedly emphasized that the only correct way to solve the trade dispute between China and the United States is through talk and consultation on the basis of equity, integrity and mutual respect", spokesman Geng Shuang said at a regular news briefing.

The US President also said he had great respect for Chinese President Xi Jinping, but the US goods trade deficit with China was too large and "we can't do that any more".

One in five respondents said duties would be "good" for the cost of products in the US, while more than three-fourths said the levies would be "bad" in regard to costs.

There was no word on whether China would back out of trade talks it said it was invited to by the US, but a Chinese Commerce Ministry statement said the USA increase "brings new uncertainty to the consultations". "We really went item-by-item trying to figure out what would accomplish the punitive goal on China and yet with the least disruption in the United States". The good news was that officials changed the list of items affected by tariffs on goods imported from China to exclude smartwatches and other Bluetooth devices. "With these latest tariffs, many hardworking Americans will soon wonder why their shopping bills are higher and their budgets feel stretched", said Matthew Shay, president and CEO, National Retail Federation.

While US inflation has continued to rise steadily albeit modestly, firms across the country report lost businesses, layoffs and possible bankruptcies as input costs rise and exports fall.


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