Trump threatens more China tariffs, Beijing ready to hit back

Robyn Valdez
April 10, 2018

Stocks were trading lower in pre-market Friday on news that President Trump has asked USA trade officials "to consider" an additional $100 billion in tariffs against China imports, on top of the $50 billion previously announced.

In a speech that officials had billed as a major address, Mr. Xi said Tuesday that plans are under way to accelerate access to the insurance sector, expand the permitted business scope for foreign financial institutions and reduce tariffs on imported automobiles and ownership limits for foreign vehicle companies.

The comments from both countries followed a week of escalating tariff threats sparked by U.S. frustration with China's trade and intellectual property policies, worrying financial markets over potential damage to global growth.

China on Friday said it will take "comprehensive counter-measures" if the United States continues its unilateral, protectionist practices.

Those factors also left the speech falling short of its billing by Chinese officials, who had said Mr. Xi would offer up important policy changes in suitable commemoration of the launch of China's market-oriented reforms 40 years ago by former leader Deng Xiaoping. Bejing has condemned Donald Trump's latest tariffs threats but warned that the United States had more to lose than China, especially politically.

Discussion of the trade dispute also touched on the possibility of China leveraging its massive holdings of USA government debt, which has been dubbed the "nuclear option". The stock market fluctuated in response to this news.

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"We don't want a trade war, but we are not afraid of such a war", said a spokesperson of the Ministry of Commerce.

"This is a problem caused by China, not a problem caused by President Trump", Kudlow said on "Fox News Sunday".

The spat between the world's two largest trading nations started last month with USA tariffs on steel and aluminum; China responded in kind with tariffs on $3 billion worth of United States exports.

Though there's still a chance for both countries to forestall the measures through negotiations, sources say this doesn't appear to be a case of Trump's trademark bluffing.

Earlier in the day, Trump tweeted about the "STUPID TRADE" with China, saying that when a Chinese-made vehicle is sent to the us, the tariff is only 2.5 percent, while American cars exported to China are slapped with a 25 percent tariff. "When you are shut out of dollar funding markets, a lot of your business will just stop working", Saxo Bank's Garnry said, while cautioning Russia's smaller role in global financial markets would limit the wider fallout.

Chinese equities make up the biggest proportion, at almost 25pc, of the $1.1bn Asian Growth strategy at Janus Henderson Investors. "China dialogue at the WTO to find a deal on intellectual property rights", said economist Rajiv Biswas of IHS Markit in a report. China is the world's largest buyer of soybeans, and it can not meet its demand without buying USA beans.

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The government is holding a public hearing on May 15 for U.S. businesses to air concerns to administration officials. At this moment, China appears to be attacking states - and workers - that voted for Trump in the 2016 election.

President Xi says a cold war and zero sum mentality are out of place and that dialogue is the way to resolve disputes. He promised progress on areas that are US priorities including opening China's banking industry and boosting imports but didn't address key irritants for Washington such as a requirement for foreign companies to work through joint ventures that require them to give technology to potential local competitors.

On the contrary, rising trade war could actually help in moderating the crude oil prices, which have gone up by over 140% from the 2016-lows due to cartelisation of oil supply by the Opec and also recent recovery in the global growth.

"The upside could be big because business as usual wasn't getting the job done in opening up the market in China", said Daniel Rosen, founder and China director of research and consulting firm Rhodium Group.

The Permian basin in Texas is leading the way as USA oil production has reached an all-time high, but the prolific output is causing bottlenecks as pipelines transporting the crude have filled up more quickly than expected, depressing prices in the region.

The Trump administration is cracking down on Chinese theft of USA intellectual property with threats of tariffs on $150bn of Chinese imports, including automobiles.

According to Kenny Yee, Rakuten Trade Sdn Bhd's head of research, sectors that are predominantly domestic-driven will be spared from the negative effects of a trade war if it escalates.

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China opposes any semblance of formal military or diplomatic ties between the United States and Taiwan.

Other reports by Info About Network

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