China Threatens New Tariffs on $75 Billion in U.S. Goods if Trump Escalates Trade War – The New York Times
SHANGHAI — China said it would impose tariffs on $75 billion in American-made goods if President Trump carries through on his promise to escalate his trade war with Beijing, in a sign that neither side is ready to back down from an economic conflict that has already cast a shadow over global growth prospects.
China’s plan to retaliate, which was announced late on Friday in Beijing, includes putting new tariffs of 5 percent or 10 percent on American agricultural products, crude oil and cars, among other items. Like Mr. Trump’s threatened tariffs on Chinese goods, China’s new tariffs would take effect in two stages, the first on Sept. 1 and the second on Dec. 15.
The news was likely to unnerve investors who worry that the trade war between the world’s two largest economies will drag down global growth. Markets fell on the news in afternoon trading in Europe, and Wall Street opened lower. It also comes at a time of growing nervousness in the United States over the economy, which shows signs of becoming a liability for Mr. Trump as he seeks re-election.
[Read more: Wall Street markets dipped Friday on the news of China’s plan.]
“I think China’s trying to show that, cooperation or fight, it is ready to do both and it is not going to be pressured into an unfavorable trade deal,” said Andy Mok, a trade and geopolitics specialist at the Center for China and Globalization in Beijing.
Mr. Mok said that China’s willingness to impose a tariff on imports of crude oil from the United States, even though China needs a lot of imported oil, shows Beijing’s determination. “One way you show your seriousness in a negotiation is to show you’re willing to incur costs,” he said.
The State Council Tariff Commission in Beijing said that the tariffs were a response to Mr. Trump’s threat to impose new tariffs by Sept. 1. Mr. Trump had initially said he would impose 10 percent tariffs on $300 billion in Chinese-made goods on that date, essentially targeting everything that the United States buys from China that has not already been hit by previous rounds of tariffs. He later delayed more than half of the latest round of tariffs until Dec. 15 to avoid hitting American pocketbooks during the holiday shopping season. A few tariffs were scrapped entirely.
Both sides have a lot at stake. Recent market moves have signaled that many investors expect the American economy to slide into recession in the future, with the trade war as a major reason.
The Chinese government has its own worries. The country’s economic growth is already slowing. Though the Chinese government keeps tight control over the country’s economy and still has a lot of financial firepower at its disposal to help growth, a huge and growing debt problem has limited its options.
For Xi Jinping, China’s top leader, the trade war brings difficult challenges. Though he has solidified his hold over the Chinese Communist Party, his broad power at home makes him vulnerable to blame should China’s economic downturn worsen. He also faces pressure to take a strong stance toward the democracy movement in Hong Kong, a semiautonomous territory of China, where huge protest marches and occasional street violence have commanded the attention of China and the world. The Trump administration has begun to hint that it sees a peaceful solution to the Hong Kong issue as another condition for a trade deal.
The trade war and the confrontation in Hong Kong also come as Mr. Xi and China are preparing for a nationwide celebration in the days and weeks leading up to the 70th anniversary on Oct. 1 of the founding of Communist China.
It was not clear on Friday how much of the new Chinese tariffs would kick in on Sept. 1 and how much would go into effect on Dec. 15. The tariffs that China announced late Friday would cover a wide range of goods, from ginseng and certain plant seeds to oil paintings and adult diapers.
Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington, estimated earlier this month that the tariff categories identified by the Trump administration represented $112 billion in goods facing extra 10 percent tariffs on Sept. 1 and a further $160 billion on Dec 15.
China’s choice of industries for this round of tariffs is the latest evidence of the country’s attempt to punish states that are part of President Trump’s political base. Still, it is far from clear that the new Chinese tariffs would have much effect in the handful of political swing states, particularly in the Upper Midwest, that have played a decisive role in recent presidential elections.
Farm states and energy-producing states generally voted for Mr. Trump by wide margins in 2016 and polls have suggested that he remains popular in them. While much of the American auto industry is based in political swing states in the Upper Midwest, these states export almost no cars to China. Most of the American family vehicle exports to China are Mercedes and BMW sport utility vehicles from factories in Alabama and South Carolina, two other states where Mr. Trump has also enjoyed considerable support.
The disproportionate scale of the proposed retaliation — tariffs on $75 billion in American goods meant to counter tariffs on $300 billion in Chinese goods — reflects how unbalanced trade has become between the two countries. The dollar value of goods targeted by China tends to be much smaller than the value targeted by the White House for the simple reason that China exports far more to the United States than it imports.
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