China to Hit U.S. With 'Synchronized' Retaliation for Latest Tariffs

Gladys Abbott
September 18, 2018

US President Donald Trump has enforced higher import taxes will apply to more than 5000 Chinese goods.

The US president ramped up the commercial crusade against China, issuing a new set of tariffs on nearly 6,000 items, ranging from garlic to steel.

Beijing has retaliated in kind, but some analysts and American businesses are concerned it could resort to other measures such as pressuring USA companies operating in China. It will rise to 25% at the end of the year.

Trump has been locked into a trade dispute with Beijing over China's policy of forcing United States companies to hand over trade secrets as a cost of doing business in China.

Trump administration is seeking systemic changes from China which Beijing has failed to do.

He also warned that if China retaliated then the United States would "immediately pursue phase three" which would mean imposing further tariffs with taxes on another $267bn worth of Chinese products.

Monday's announcement means almost half of all goods imported from China will be subject to tariffs.

The escalating confrontation shook up global stock markets. The action would bring the total amount of Chinese products subject to duties to $250 billion, roughly half of the amount the United States imported from that country in 2017.

In July, the White House increased charges on $34bn worth of Chinese products.

The decision comes despite a Treasury invitation earlier this week to senior Chinese officials, including Vice Premier Liu He, for more talks to try to resolve trade differences between the world's two largest economies.

The administration teed up the steep new duties months ago.

Japan has informed the WTO that it plans to impose retaliatory measures on United States goods to the tune of 50 billion yen ($455 million). Chinese news reports have quoted a former finance minister as saying Beijing can disrupt American companies' operations by imposing "export controls" if it needs more leverage in its mounting tariff dispute with Washington.

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Lower economic growth in China would have spill-over effects to the rest of Asia given that, just as it provides critical links in the supply chains of USA companies, they are also plugged into its supply chain.

Which items have been targeted?

. "They want to make a deal".

Consumer goods feature strongly on the latest list - although following lobbying from retailers and technology giants, some items expected to be on the list have been excluded.

Smart watches, bluetooth devices removed from tariff list; bicycle helmets, baby vehicle seats, safety gear also excluded.

The firms are anxious the tariffs will increase their costs since many of their products are manufactured in China.

White House trade adviser Peter Navarro discusses the trade negotiations between the US and China. "The spillover effect will be amplified, as companies using the higher tariff and therefore higher cost products as raw materials will gradually diversify or shift supply away from China". The idea is they would boost local businesses and support the national economy.

In May, Trump announced he was abandoning the 2015 nuclear deal with Iran and reimposing sanctions in two phases in August and November, with the second targeting the country's vital oil and gas sector. "We see a small boost to inflation as tariffs pass through to the household sector".

Farmers, manufacturers, retailers and other industry groups have formed a coalition to oppose the tariffs, calling them taxes on American families.

It could offset the new tariffs by allowing it to drift lower, although further and significant depreciation would risk triggering an exodus of capital. Smartwatches-after a direct request from Apple Inc. -and Bluetooth devices were among the products to be exempted from the levies.

The government has outlined a plan to impose further tariffs on roughly $60bn worth of USA goods, and threatened other measures.

The Chinese government said last week it welcomed Washington's proposal for more talks, though neither side has given any indication it is willing to compromise.

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