New round of proposed tariffs would hit United States consumers

Frederick Owens
July 13, 2018

China slammed the latest United States tariff threat as a "totally unacceptable" escalation of their trade battle and vowed Wednesday to protect its "core interests".

The U.S. dollar strengthened against the Japanese yen on Wednesday as trade tensions mounted and after the Labor Department's expectation-beating inflation report, which increased prospects that the Federal Reserve will raise interest rates another two times this year.

China on July 12 said foreign firms operating in China would suffer in a trade war, urging USA companies to lobby their government to protect their interests, and said no talks to end the impasse were now under way. In the meantime, we appeal to the global community to jointly defend free trade rules and the multilateral trade regime and fight trade bullying.

Here's why that could prove a soft spot in the White House's trade strategy: American multinationals have far more extensive operations in China, both in terms of sales and employees, than Chinese companies have in the U.S. There is "considerable scope for China to retaliate by penalizing these firms, for example via much more stringent regulatory checks or consumer boycotts", according to Capital Economics.

Chinese tactics, the administration said, include outright cybertheft and forcing USA companies to hand over technology in exchange for access to the Chinese market. China immediately responded with $34 billion worth of tariffs on American-made goods in retaliation.

President Donald Trump has threatened to tax as much as $US550 billion in Chinese products - an amount that exceeds America's total imports from China past year.

More than 6,000 items could be affected - including burglar alarms, auto tyres, handbags, baseball gloves, carpets, toilet paper, dog food, and hundreds of food products.

"Rather than address our legitimate concerns, China has begun to retaliate against U.S. products".

"China is shocked at the United States action", the Commerce Ministry said in a statement on its website Wednesday.

The US administration on Friday imposed 25% duties on Chinese imports worth $34 billion (Rs 23,454 crore) after threatening to do so for months.

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

In financial markets, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.5 percent, while the main indexes in Hong Kong and Shanghai fell more than 2 percent. On Wall Street, futures for the Dow Jones industrial average and Standard & Poor's 500 index were up 0.4 percent.

The onshore yuan tracked its offshore counterpart lower with traders closely watching the key 6.7 per dollar level as pressure mounted on the currency.

South Korea's trade ministry said Thursday it is preparing for fallouts from the flaring trade dispute between the United States and China as the world's two largest economies are seemingly on a collision course that could have global repercussions.

Beijing is running out of American goods for retaliatory tariffs due to its lopsided trade balance, which means it might impose other measures.

President Donald Trump is in the midst of a trade war with countries like China, Mexico and Canada.

The move drew immediate condemnation from Senate Finance Chairman Orrin Hatch, a Republican from Utah, who called it "reckless" and not "targeted". That would leave China only $80 billion for further retaliation. Tariffs are taxes on consumers and businesses.

If China were to back down, the Trump administration might hold off on the newest tariffs.

Louis Kuijs, Hong Kong-based Head of Asia Economics at Oxford Economics, said while he expects China to strongly condemn the USA moves, its policy response is likely to be limited for now. "China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology", Trump said.

The Chinese government went on to paint itself a defender of free trade, urging the international community to "work together" to protect a global commerce flow that has brought wealth to nations worldwide.

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