Trump threatens China with new tariffs on another $200 billion of goods

Roman Schwartz
June 20, 2018

U.S. President Donald Trump delivers remarks at the National Federation of Independent Businesses 75th Anniversary Celebration in Washington, U.S., June 19, 2018. Maybe you're a self-identifying nationalist who agrees with Trump that it's high time America pushes back against unfair Chinese trade practices - though you're probably more angry about lost factory jobs than the theft of intellectual property and massive state subsidies to favored companies.

Trump agreed to end a ban on the sale of USA parts to Chinese telecommunications firm ZTE, while celebrating China's offer to increase its importation of American farm products as a major trade victory.

The president said the tariffs were in reaction to China's decision to place similar import taxes on $50 billion in USA goods.

But the new tariffs do have the potential to squeeze production in Southeast Asia, an increasingly essential region in the global solar market.

"This practice of extreme pressure and blackmail" will be met with other comprehensive quantitative and qualitative measures, the country's Commerce Ministry warned.

A central concern of the USA administration - and the reason for the initial sanctions - was alleged intellectual property theft by Chinese firms. That follows the plan for tariffs on US$50b of Chinese goods - which comes into effect on July 6.

Trump's list will have to undergo a two month comment period before it is finalized.

He said China's latest action clearly indicated its determination to keep the U.S. at a permanent and unfair disadvantage, which is reflected in the massive Dollars 376 billion trade imbalance in goods. China's tariffs would target agricultural products, cars and seafood, among other items.

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US President Donald Trump raised the stakes in the trade dispute with China by threatening to impose tariffs on another US$200b worth of Chinese goods.

In addition to the second set of tariffs, Trump also threatened to hit China with a third wave - an additional 10% on another $200 billion worth of Chinese goods - if the Beijing rolled out their own wave of tariffs. "After the legal process is complete, these tariffs will go into effect if China refuses to change its practices and also if it insists on going forward with the new tariffs that it has recently announced".

Given the escalating rhetoric on trade, some investors said the slide in USA stocks was relatively small.

Speaking to a gathering of small business owners in Washington, Trump again blasted the North American Free Trade Agreement, saying the US can no longer afford to be the "stupid country". Last week, the USA levied tariffs on $34 billion of Chinese goods.

Two decades ago, China's economy was largely fuelled by exports, but it has made progress in rebalancing towards domestic investment and consumption since the global financial crisis erupted last decade - limiting the damage trade tariffs could inflict on Beijing. That means things like tourism and education, industries from which the United States benefits a lot more than China does. "We'll see whether or not we can make a reasonable NAFTA deal".

The S&P index recorded two new 52-week highs and three new lows, while the Nasdaq recorded 28 new highs and 22 new lows. She said Canada, Mexico and the US will continue negotiating NAFTA through the summer and that she is convinced there is "goodwill" moving forward.

Gary Cohn, Trump's former top economic adviser, said last week that a "tariff battle" could result in price inflation and consumer debt - "historic ingredients for an economic slowdown".

Are US and China on the brink of a trade war?

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