Only 4 Days in, China-US Trade War Escalates

Soybean prices have fallen dramatically in recent weeks.
Daniel Acker  Bloomberg

Soybean prices have fallen dramatically in recent weeks. Daniel Acker Bloomberg

China's Ministry of Commerce vowed to hit back at the latest tariffs on Wednesday, saying that it was "absolutely unacceptable" that the United States was escalating the situation.

"Unilateral actions that alienate long-standing US allies and close off the USA market to the rest of the world are not a recipe for economic growth and prosperity and are very unlikely to change China's unfair practices", ACC said.

A possible second round of tariff hikes announced Tuesday by the US Trade Representative targets a US$200 billion list of Chinese goods.

The foreign ministry described Washington's threats as "typical bullying" and said China needed to counter-attack to protect its interests.

United States officials issued a list of thousands of Chinese imports the Trump administration wants to hit with the new tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminum.

It also includes consumer goods ranging from auto tyres, furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products.

The escalation of USA tariffs on China comes in the wake of American trade battles with Europe, Canada, and Mexico and amid President Donald Trump's visit to Brussels for a North Atlantic Treaty Organisation summit.

"China's export sector will therefore suffer a significant deterioration in export competitiveness to the USA compared to other emerging markets' manufacturing exporters, such as Vietnam, South Korea, Thailand, Bangladesh, Mexico and Brazil", he added. The list covers some $200 billion in Chinese exports that could be hit by a 10 percent tariff.

The move marked the latest escalation of the ongoing trade war between Washington and Beijing.

Last week, China and the USA imposed another round of tariffs on each other, and the USA said on Tuesday that it could impose tariffs on an additional US$200 billion worth of Chinese imports.

U.S. President Donald Trump and first lady Melania arrive on Air Force One at Beijing, China, November 8, 2017.

These new suggested levies won't take effect until after a public comment period which runs through August.

'Tonight's announcement appears reckless and is not a targeted approach, ' Senate Finance Chairman Orrin Hatch said. "Tariffs threaten to boomerang on the very workers they're supposed to help, and will only further undermine the confidence manufacturers need to make investments in new equipment, facilities and people".

"This is an appropriate response under the authority of Section 301 to obtain the elimination of China's harmful industrial policies", Robert Lighthizer, the USA trade representative (USTR), said.

"American families are the ones being punished".

Analysts have warned that a spiralling trade war between the world's two financial powerhouses could have a damaging impact on the global economy.

China imports far less from the USA than the U.S. imports from China.

"There certainly is going to be pronounced risks mainly because we have now moved on to the tit-for-tat-for-tit phase of it", said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore.

The White House says the tariffs are a response to unfair trade practices by China. "When they see their prices rise, they're going to be shocked", he said.

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