After Trump ordered his administration to consider tariffs on an additional $100 billion in Chinese goods on Thursday, sending US stock futures tumbling, China’s commerce ministry said in a statement in Beijing on Friday that the nation doesn’t want a trade war, but is ready to fight one.
Trump’s unexpected move threatens to unravel efforts by top US and Chinese trade officials to lower the heat and reach an agreement that could stave off an escalating conflict, after the release of a list of tariff targets earlier this week prompted immediate threats of retaliation from Beijing.
US stock futures dropped on Trump’s latest trade directive to the US Trade Representative. S&P 500 Index futures slid as much as 1.6%, after the underlying gauge ended up 0.7% on Thursday. Asian equities were mixed, while the yen rose before retracing most of the move.
“In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs," Trump said in a statement issued by the White House.
A White House official later said the $100 billion figure Trump used in the statement referred to the value of the imports that would be covered by the additional tariffs, not the total amount of tax that would be charged on the products.
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“The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people," the commerce ministry said in a statement on its website, without further detailing any planned measures.
“This is starting to feel like the beginnings of a trade war, if simply each proposal is matched with a retaliation," said Patrick Bennett, a Hong Kong-based strategist at Canadian Imperial Bank of Commerce. “The US risks isolating itself from global trade in this process and we think the US, USD and US asset markets have more to lose."
China said on Wednesday it would levy a 25% tariff on about $50 billion of US imports including soybeans, automobiles, chemicals and aircraft. That was in response to the release by the US of a list of proposed tariffs a day earlier, covering $50 billion in Chinese products.
Were China to want to match Trump’s latest threat in kind, it wouldn’t have enough American goods imports to target. It could still take other measures — like curbing package tours or student transfers to the US, or steps against American companies’ operations in China.
US Trade Representative Robert Lighthizer quickly followed up on Trump’s Thursday evening declaration with a statement of his own stressing that none of the tariffs would take immediate effect. The administration hasn’t said when any of the proposed tariffs would go into force.
He said that any additional tariffs first would be subject to a 60-day public comment period, as would the penalties announced earlier in the week.
“No tariffs will go into effect until the respective process is complete," Lighthizer said.
Trump’s newly installed chief economic adviser, Larry Kudlow, and other administration officials have spent the past two days trying to tamp down fears of a trade war.
“I think we’re going to come to agreements," Kudlow told Fox News on Wednesday. “I believe that the Chinese will back down and will play ball."
Yet Trump signalled a harder line in a speech earlier Thursday, saying it was time to stop China from “taking advantage" of America.
“You have to go after the people who aren’t treating you right," Trump said in West Virginia. “We’re going to have a fantastic relationship long term with China, but we have to get this straightened out. We have to have some balance."
Kudlow said on Thursday that the administration was involved in “delicate negotiations" that might forestall the need for tariffs. He said the US could still hammer out a deal with Beijing, in part by persuading other major economies to call out the Asian nation for unfair trading practices.
China countered Trump’s plan announced on Tuesday to slap tariffs on 1,333 of the country’s products — such as semiconductors and lithium batteries — by announcing duties on a variety of agriculture products, including soybeans, the second-most-valuable US crop.
The US shipped $14.6 billion of soybeans to China, its biggest buyer, in the last marketing year — more than a third of the entire crop. Agriculture is one of the few sectors of the American economy that runs a trade surplus.
That would hit US farmers hard at a time they are already dealing with depressed crop prices and stagnant values for their land. Concern about a potential trade war already had been rippling through farm states, which are a crucial part of Trump’s political base and a powerful voting bloc in November’s congressional elections.
“Essentially President Trump is playing hard ball to force China to the negotiating table at the WTO to work out a new agreement with the US on technology licensing requirements," said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit Ltd. in Singapore. “If a new deal can be reached between the US and China through talks at the WTO, it is quite possible that the proposed US Section 301 tariffs on China may not be implemented." Bloomberg