China warns US over tariffs as looming trade war spooks markets

China warns US over tariffs as looming trade war spooks markets

23/03/18

China has said it will retaliate to US tariffs on Chinese imports with tariffs of its own, in a move that makes the prospect of a trade war increasingly likely.

President Trump is pressing ahead with measures announced last week, which he says are in response to concerns over China’s misappropriation of US intellectual property, CNN reports.

China, which has previously been restrained in its response to new tariffs, broke cover last night with a bold statement warning the US that it would not shy away from a trade war.

‘If a trade war were initiated by the US, China would fight to the end to defend its own legitimate interests with all necessary measures,’ the statement read.

‘We urge the US to cease and desist, make cautious decisions and avoid placing China-US trade relations in danger with the purpose of hurting others that eventually end up hurting itself,’ it added.

According to Reuters, China’s Foreign Ministry has plans for tariffs on US imports, with spokeswoman Hua Chunying saying: “It’s impolite not to give as good as one gets”.

Chinese state media outlet Xinhua stated that, ‘Washington is dragging Beijing into a possible massive trade war,’ and ran an infographic illustrating how China proposes to target US imports in return.

In a package worth $3bn, Beijing is considering removing tariff restrictions on 128 American items, and placing 15 per cent tariffs on products such as fruit and wine, and 25 per cent tariffs on pork and recycled aluminium.

The announcement spooked global markets, sending the US stock market tumbling, with the Dow Jones Industrial Average down 2.93 percent: its biggest single day percentage drop since early February, according to The Telegraph. Japan’s Nikkei 225 index fell 4.5% and the Shanghai Composite fell 3.6%, the BBC reports.

However, Beijing’s proposed retaliatory tariffs account for a negligible amount of China’s US imports, The Straits Times reports, suggesting that President Xi is ‘going to wait before unleashing his country’s formidable arsenal in response.’

The proposed tariffs of 15 and 25 per cent respectively mirror President Trump’s tariffs on steel and aluminium outlined earlier this month. This suggests that China is indeed taking a restrained approach – at least initially – with the latest US tariffs not being countered.

China Daily meanwhile sought to blame President Trump’s politicking for the rising tensions. An editorial published today said: ‘By imposing such punitive tariffs on Chinese imports, Trump has shifted public attention from the United States’ domestic problems to the trade dispute with China to garner more public support at home.’

It also added that ‘a trade war may not necessarily be a bad thing for China, because despite being the main target of anti-dumping and anti-subsidy protectionist measures over the past decades, China has become the world’s largest manufacturer and exporter, and the second-largest economy.

‘A trade war declared by the US is also unlikely to stop China from becoming a stronger economic power.’