Wed | Nov 21, 2018

China blasts new US tariff threat as blackmail, warns it will retaliate

Published:Wednesday | June 20, 2018 | 12:04 AM
In this Thursday, June 14, 2018 file photo, a Chinese national flag at Tiananmen Square flutters against the capital city tallest skyscraper, China Zun Tower, under construction at the Central Business District in Beijing. China has threatened “comprehensive measures” in response to US President Donald Trump’s new tariff hike, raising the possibility Beijing might target operations of American companies.

China on Tuesday threatened "comprehensive measures" in response to US President Donald Trump's new tariff hike, raising the possibility that Beijing might target operations of American companies.

Trump's announcement fuelled fears that economic losses, limited so far to companies hit by United States or Chinese tariff hikes, might spread if the dispute chills global trade.

The Chinese Commerce Ministry criticised Trump's order for new tariffs on US$200 billion of Chinese goods as blackmail. In a forceful statement, it said Beijing was ready to "defend the interests of the Chinese people and enterprises".

If the tariff hike goes ahead, "China will have to adopt comprehensive measures that combine quantity and quality," the statement said.

It gave no details, but China's lopsided trade balance with the United States means Beijing doesn't import enough American goods to stick with its strategy of matching the scale of Trump's tariff increases.

China responded to the US announcement Friday of a 25 per cent tariff on US$34 billion of Chinese goods by imposing an identical charge on the same amount of American goods. But China's imports from the United States last year totalled US$153.9 billion. That would leave about US$120 billion available for a tariff hike, falling short of Trump's US$200-billion target.

The mention of "comprehensive measures" suggests Beijing might go beyond tariffs, said Jake Parker, vice-president for China-operations of the US-China Business Council. He asked whether that might include delaying or denying licences required by US companies.

"That seems to open up a new front," Parker said.

China's heavily regulated economy also gives officials the option of tying up companies with tax, anti-monopoly or other investigations.

"China could target US firms through tax and regulatory policies," Citigroup said in a report.

The dispute is part of broader US complaints about global trading conditions that have prompted Trump to raise duties on steel, aluminium, washing machines or solar panels from Canada, Europe, Japan and South Korea.

Economists warn Washington might be undercutting its negotiating position by alienating potential allies.

Tariff hikes imposed so far by Trump affect a total of US$109 billion of imports, according to Morgan Stanley. It said that with retaliatory tariffs imposed by American trading partners added in, the total rises to US$181 billion, or one per cent of global trade.

The risks of "a more meaningful impact on global trade and growth have increased," Morgan Stanley economists said in a report.

The United States and China have the world's biggest trading relationship, but official ties are increasingly strained over complaints Beijing's technology development tactics hurt American companies.

Beijing has offered to narrow its politically volatile trade surplus with the United States, but has resisted changing development plans its leaders see as a path to prosperity and to restoring China's rightful role as a global leader.

Trump's tariffs target goods the White House says benefit from industrial policies that China's trading partners say violate its market-opening pledges.

The Trump administration also has threatened a tariff hike on another US$100 billion of imports in its parallel dispute over Beijing's trade surplus. It has yet to say when that might take effect.

Europe, Japan and other trading partners raise similar complaints. But Trump has been unusually direct about threatening to disrupt such a large volume of Chinese exports.

"Beijing will not panic in response to Trump's latest threat, but will be deeply concerned," Eurasia Group said in a report.

It said the Chinese government is trying to find out whether Trump has the "political strength" to carry out his threats and is pressuring US interests to force him to compromise.

- AP