Shots fired as US-China tariffs take hold

Pauline Gross
July 6, 2018

He has already threatened to escalate US tariffs to cover almost all the goods the United States imports from China if he does not get his way.

While the Trump administration has tailored its tariffs to target certain Chinese goods that will not directly affect many American consumers, products including machinery and engine parts, China's tariffs squarely target industries vital to Trump's base, according to the Associated Press.

Noting reports that the USA could add a tax on essentially every product shipped from China, Gao said "using the tariff stick to bully on trade runs against the trend of the times".

China cannot match Trump on tariffs - it imported $130 billion in goods from the United States previous year, compared with America's $505 billion in purchases from China - but it can apply other forms of pressure, analysts say. China immediately said it would be forced to retaliate.

But if the scope of the tariffs widened then New Zealand could be affected - either through intermediary goods sold into the USA or China for further processing or because markets were disrupted more broadly.

Analysts said that for companies with supply exposure to tariffs, they will move sourcing country of origin if they can; and if they cannot, they will pass on as much of the tariff cost as they can, or see a cut in margins.

Chinese state media has run numerous commentary pieces on the dispute over the past few days criticizing the American position.

Xi's government has expressed confidence China can hold out against US pressure, but companies and investors are uneasy.

Beijing has announced a series of headline-grabbing initiatives including "Made in China 2025", which calls for creating Chinese global competitors in robotics, artificial intelligence, biotechnology and other fields.

There did not appear to be any direct guidance to hold up cargoes, but some customs departments were waiting until they had received official instructions from the central government on whether to start collecting the hefty new import tariffs on hundreds of products, the sources said. The U.S. government is afraid China is pursuing this in an unfair way.

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On Thursday, Trump warned that the United States may ultimately target over $500 billion worth of Chinese goods, or roughly the total amount that the United States imported from China previous year.

"It's still hard for me to believe the Trump administration could develop and negotiate an overarching package with China that genuinely sticks", Kennedy said.

Beijing said it would not hesitate to match those tariffs either.

At 12:01 am in Washington - 4pm New Zealand time - tariffs of US$34 billion came in to force on Chinese goods.

Top Economists and trade experts who testified in June before the U.S. The threat deepened tensions with the European Union, which warns that vehicle tariffs would inflict pain across its 28 member states. US and Chinese companies will now find it costlier to trade with each other, meaning less demand and higher prices.

And they say the current United States economic strength, as well as America's soaring trade deficit in goods, means the world's largest economy can outlast its rivals in the current tit-for-tat battle, presenting Washington with a rare window of opportunity to settle old scores.

"The global financial crisis, which ensured that we now act in the framework of the G-20, would never have been resolved so quickly, despite the pain, if we hadn't cooperated in a multilateral fashion in the spirit of comradeship", Merkel said on Wednesday. "To put it simply, the opening fire on the entire world, including itself", Gao said. Officials in Beijing reject accusations of theft and say foreign companies have no obligation to hand over technology.

In the past, the US used its economic clout to win trade skirmishes with developing countries, said James Boughton, a senior fellow at the Centre for International Governance Innovation in Waterloo, Ontario.

There was no evidence of last-minute negotiations between US and Chinese officials, business sources in Washington and Beijing said.

People's Bank of China Party Chief Guo Shuqing sought to calm markets, saying bond market risks are controllable and the economy is capable of bearing the impacts of trade frictions.

Other reports by GizPress

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