White House confirms proposals to increase China tariffs

President Trump has instructed US Trade Representative Robert Lighthizer to consider increasing proposed tariffs on US$200 billion of Chinese imports from 10 per cent to 25 per cent, the White House has confirmed.

According to Reuters, Lighthizer said the potential increase “is intended to provide the administration with additional options to encourage China to change its harmful policies and behaviour and adopt policies that will lead to fairer markets and prosperity for all of our citizens.”

There are public hearings scheduled for 20-23 August to the discuss the proposal, Nikkei Asian Review reports, with comments accepted until 5 September. The new duties could then come into effect later that month.

Yesterday, China’s Foreign Ministry said it would retaliate against “counterproductive” tariff escalations, which makes a reciprocal move likely. Given that the latest US threat comes, in part, as a response to previous reciprocal duties from Beijing, it’s hard to see President Trump tolerating such a move. The trade war is therefore primed to intensify.

The heightening of trade tensions took a toll on market confidence today, with CNN reporting China’s stock market taking a ‘slam’, and CNBC identifying ‘cautious’ trading across Asia as markets opened.

The Chief Executive of South East Asia’s largest bank, DBS Group Holdings, has also entered the discussion, warning that the trade war is knocking confidence in the region.

Piyush Gupta told CNBC: “The fact that people are more uncertain about where this is going creates a degree of lower confidence and that results — whether it’s the credit spreads or the stock market — in animal spirits in the region coming off.”

‘Animal spirits’ is the Keynesian term linking human emotions with consumer confidence.