China retaliates in deepening trade row over tariffs

Deepening a trade battle and sending financial markets into a tailspin, China announced Monday it was raising tariffs on US$60 billion of United States goods in retaliation for the latest hike in US tariffs on its exports.

The finance ministry said Monday the new penalty duties of 5% to 25% on hundreds of US products including batteries, spinach and coffee will take effect June 1.

That followed Trump’s increase on Friday of duties on US$200 billion of Chinese imports from 10 per cent to 25 per cent after charging that China had backtracked on commitments it made in earlier negotiations in a dispute over Beijing’s technology ambitions and perennial trade surplus.

Resuming his messages over Twitter early Monday, US President Donald Trump warned Chinese President Xi Jinping that China “will be hurt very badly” if it doesn’t agree to a trade deal.

China had vowed “necessary countermeasures” on Friday against Trump’s escalation of the tariff conflict.

Beijing is running out of US imports for penalties because of the lopsided trade balance between the world’s two largest economies. Regulators have targeted American companies in China by slowing down customs clearance for shipments and processing of business licences.

The new tariffs are likely to hurt exporters on both sides, as well as European and Asian companies that trade between the United States and China or supply components and raw materials to their manufacturers.

The increases already in place have disrupted trade in goods from soybeans to medical equipment and sent shockwaves through other Asian economies that supply Chinese factories.

Forecasters have warned that the US tariff hikes could disrupt a Chinese recovery that had appeared to be gaining traction. Growth in the world’s second-largest economy held steady at 6.4 % over a year earlier in January-March, supported by higher government spending and bank lending.

The tensions “raise fresh doubts about this recovery path,” Morgan Stanley economists Robin Xing, Jenny Zheng and Zhipeng Cai said in a report.

The latest US charges could knock 0.5 percentage points off annual Chinese economic growth and that loss could widen to one percentage point if both sides extend penalties to all of each other’s exports, economists say. That would pull annual growth below 6%, raising the risk of politically dangerous job losses.

The latest talks ended with no word of progress on Friday.

AP