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- President Donald Trump instructed the US Trade Representative to identify another $200 billion in Chinese imports that could be subject to a 10% tariff.
- China responded by calling the move “blackmail” and stated that the US “initiated a trade war.”
- China also threatened to hit back with proportional restrictions.
- The back-and-forth is the latest is a sustained trade fight between the two countries.
China on Tuesday showed no sign of backing down after President Donald Trump threatened to kick off a full-blown trade war with the country.
Trump directed the US Trade Representative’s office to draw up a list of Chinese goods worth $200 billion that could be subject to a new 10% tariffs, or taxes on imports, on Monday. The move would be the largest blow in the tit-for-tat tariff fight between the US and China.
In response, the Chinese government called the decision an “act of extreme pressure and blackmail” and said Trump had effectively kicked off a trade war.
“The United States initiated a trade war and violated the laws of the market,” the Chinese Ministry of Commerce said in a statement. “It did not meet the current development trend of the world, harmed the interests of the people and enterprises of China and the United States, and harmed the interests of the people of the world.”
The ministry also responded to Trump’s threat that a third set of tariffs, again totaling $200 billion wroth of Chinese imports to the US, would move forward if China hits back at the first set.
“If the US side becomes irrational and issues the list, China will have to adopt comprehensive measures in quantity and quality in order to make strong countermeasures,” the statement said.
China will have to get creative to respond in equal measure
China does not import nearly enough US goods to hit back if Trump imposes the full tariffs on $450 billion worth if goods that have been threatened. But Louis Kuijs, head of Asia economic at Oxford Economics, said Beijing could increase the tariff levy to make up for the smaller raw amount of goods.
“In terms of tariff imposition, China will run out of ammunition faster, since it imported only $130 billion of goods from the US in 2017,” Kuijs wrote Tuesday. “But, including services, the imports amounted to $187 billion and China could impose higher tariffs than the US in a bid to retaliate one-to-one.”
But if Trump goes through with the 25% tariff on $50 billion of Chinese imports to the US and 10% on another $400 billion worth of imports, China would need to impose a 40% tariff on the $130 billion worth of US goods imports to China to hit back in an equal amount.
Isaac Boltansky and Lukas Davaz, analysts at the research and trading firm Compass Point, said the Chinese could use some out-of-the-box thinking to strike against the US, including “stalled regulatory approvals, brand boycotts, and currency devaluation.”
“Our sense is that President Trump believes the Chinese have little latitude to retaliate given the current trade disparity, but Beijing could employ peripheral policies beyond tariffs that serve to further escalate tensions between the two countries,” Boltansky and Davaz wrote in a note to clients.
While the exact size and scope of Beijing’s response is merely theoretical at this point, it’s clear that the Chinese have no intention of giving in to Trump’s threats.
“The Trump administration appears to think it can strong-arm China in making concessions by scaling up the amount of trade it imposes tariffs on,” Kuijs wrote. “However, China is adamant about not wanting to look weak in this conflict with the US.”
Here’s a rundown of major events in the US-China trade battle:
- March 1: Trump announces tariffs on all imports of steel and aluminum, including metals from China.
- March 22: Trump announces the US will soon hit $50 billion worth of Chinese goods with a 25% tariff. China announces tariffs in retaliation for the steel and aluminum tariffs, promises response to new announcement.
- April 3: The USTR announces the full list of Chinese goods that could be subject to the tariff, there is a mandatory 60-day comment period for industries to ask for exemptions from the tariffs.
- April 4: China rolls out a list of more than 100 US goods with roughly $50 billion that will be subject to retaliatory tariffs.
- April 5: Trump threatens to hit China with an additional $100 billion worth of Chinese imports with tariffs.
- May 19: After a visit from Chinese officials, the two countries announce the outline of a deal to avoid the tariffs.
- May 29: The White House announces that the tariffs on $50 billion of Chinese goodswill move forward, with the final list of goods released June 15. The move appears to wreck the nascent trade deal.
- June 15: Trump rolls out the final list of goods subject to new tariffs. Chinese imports worth $34 billion will be subject to the new 25% tariff as og July 6, with another $16 worth of imports subject to the tariff at a later date. China retaliates with an equivalent set of tariffs.
- June 18: Trump directs the USTR to identify $200 billion worth of Chinese imports to hit with a 10% tariff and threatens another $200 billion worth of goods if China retaliates again.