The Strategist

China lashes back at the USA

04/05/2018 - 12:36

The US and China found themselves on the brink of a trade war after the administration of US President Donald Trump unveiled details of a plan to impose a 25 percent duty on Chinese exports for a total of about $ 50 billion a year.

Sgt. Mikki Sprenkle
Sgt. Mikki Sprenkle
The Chinese authorities reacted in a mirror manner, saying on Wednesday they intended to impose similar duties on US export goods for the same amount.

The US actions against China are the most stringent since the normalization of diplomatic relations between the two countries in the 1970s, The Wall Street Journal reports.

At the same time, China's response was more serious than expected. Many believed that Beijing would make concessions, recognizing that the imbalance in the trade relations between the two countries was excessive and unacceptable. However, China went to more stringent measures that affect the key goods of American exports.

Nevertheless, representatives of the Chinese authorities declare their readiness for negotiations with the United States.

The US plan envisages introduction of a 25 percent duty on the import of a wide range of Chinese goods, including medicines and chemical products, cars, motorcycles, railway equipment, manufacturing and medical equipment, aviation parts, and satellites, a total of more than 1,300 items.

The new duty will be extended to a number of consumer goods - dishwashers, televisions and auto parts. However, it will not affect the key categories of retail sales, such as clothing, footwear, mobile phones and furniture as rising prices for these products could cause a negative reaction of US consumers, writes WSJ.

The list of goods is based on the opinion of the US trade mission about which categories of Chinese products unfairly benefit from the industrial policy of the PRC, as well as the plan of development of strategically important technologies promoted by the country’s authorities.

The US is focused on sectors that Beijing openly tries to promote. According to analysts, it shows that Washington intends to prevent China from gaining global leadership in the technology sector that it seeks.

Trump and representatives of his administration repeatedly accused the PRC of the long-term theft of American intellectual property.

American companies may raise objections to the measures being prepared before May 22 of this year. Public hearings on this issue in Washington will be held on May 15.

China reacted with countermeasures to US actions. The PRC Ministry of Trade reported on Wednesday that it would impose a 25% duty on 106 items of US exports in response to US actions. The number of product names for which the PRC will introduce a new fee is significantly smaller compared to the 1,300 items declared by the US, but the annual export of these products to China is also about $ 50 billion.

In particular, the new duty will be applied to American cars and aircraft, chemical and tobacco products, beef, and agricultural products, including soybeans, wheat, corn and cotton.

The new fees are expected to enter into force when it will happen in the US, Bloomberg reports with reference to its sources.

The last response of the PRC to the actions of the US authorities was harsher than many experts expected, given Beijing's rather mild reaction to the recent introduction of US duties at a rate of 25% on steel imports and 10% on aluminum imports.

Earlier, Beijing announced introduction of duties on 128 types of US exports of an aggregate volume of about $ 3 billion per year. So, pork from the United States is now subject to a duty of 25%; similar tariffs for import of frozen pork, grape wines, some types of fruits, nuts in China vary from 15% to 25%.

Measures announced by the Chinese authorities on Wednesday affect Boeing aircraft and soybeans, the key elements of US exports. This shows that Beijing’s previous actions were not for a show, experts say.

"China's response was harsher than expected. No one expected China to introduce new tariffs for such sensitive and important areas of US exports as airplanes and soybeans," said an analyst at Scotiabank in Singapore. "The trade war will ultimately harm both countries and their economies."

Shares of Boeing in the course of preliminary trading on Wednesday fell by 6%. 

May futures for soybeans in the course of trading on CBOT on Wednesday lost 4.7%. China buys about a third of the US soybean harvest; in the past year the volume of US soybeans supplies to the PRC reached $ 13.9 billion.

Futures for wheat for delivery in May fell in price by 1.8%, for corn - by 3.4%.