China on Friday said it would not be blackmailed and warned of retaliation after US President Donald Trump vowed to slap a 10% tariff on $300 billion of Chinese imports from next month, sharply escalating a trade row between the world’s biggest economies.
Trump stunned financial markets on Thursday by saying he plans to levy the additional duties from Sept. 1, marking an abrupt end to a truce in a year-long trade war that has slowed global growth and disrupted supply chains.
Beijing would not give an inch under pressure from Washington, Chinese Foreign Ministry spokeswoman Hua Chunying said.
“If America does pass these tariffs then China will have to take the necessary countermeasures to protect the country’s core and fundamental interests,” Hua told a news briefing in Beijing.
“We won’t accept any maximum pressure, intimidation or blackmail. On the major issues of principle we won’t give an inch,” she said, adding that China hoped the United States would “give up its illusions” and return to negotiations based on mutual respect and equality.
Trump also threatened to further raise tariffs if Chinese President Xi Jinping fails to move more quickly to strike a trade deal.
The newly threatened duties, which Trump announced in a series of tweets after his top trade negotiators briefed him on a lack of progress in talks in Shanghai this week, would extend tariffs to nearly all Chinese goods that the United States imports.
The president later said if trade discussions failed to progress he could raise tariffs further – even beyond the 25 percent levy he has already imposed on $250 billion of imports from China.
Senior Chinese diplomat Wang Yi told reporters on the sidelines of an Association of Southeast Nations event in Thailand that additional tariffs were “definitely not a constructive way to resolve economic and trade frictions”.
US Secretary of State Mike Pompeo, who was also in Bangkok, decried “decades of bad behaviour” by China on trade and said Trump had the determination to fix it.
The news hit financial markets hard. On Friday, Asian and European stocks took a battering and safe-haven assets such as the yen, gold and government bonds jumped as investors rushed for cover.
Retail associations in the United States predicted a spike in consumer prices, hitting consumer stocks on Thursday on Wall Street, where Target Corp tumbled 4.2%, Macy’s Inc fell 6% and Nordstrom Inc was down 6.2%. Asked about the impact on financial markets, Trump told reporters: “I’m not concerned about that at all.”
Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone.
The tariffs may also force the Federal Reserve to again cut interest rates to protect the US economy from trade-policy risks, experts said.
One Chinese official told Reuters it was not the first time Trump had “flip-flopped”, and that though the time between the talks being declared constructive and Trump’s threat of new tariffs was short, officials in Beijing were already prepared.
“Discussion followed by a fight has become the normal pattern,” the official said.
Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths that are used in everything from military equipment to consumer electronics, and penalties against US companies in China, analysts say.
So far, Beijing has refrained from slapping tariffs on US crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25% on about $110 billion of US goods since the trade war broke out last year.
China is also drafting a list of “unreliable entities” – foreign firms that have harmed Chinese interests. US delivery giant FedEx is under investigation by China.
“China will deliver each retaliation methodically, and deliberately, one by one,” ING economist Iris Pang wrote in a note.
“We believe China’s strategy in this trade war escalation will be to slow down the pace of negotiation and tit-for-tat retaliation. This could lengthen the process of retaliation until the upcoming US presidential election,” Pang said.
US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin briefed Trump earlier this week on their first face-to-face meeting with Chinese officials since Trump met Xi at the G20 summit at the end of June and agreed to a ceasefire in the trade war.
“When my people came home, they said, ‘We’re talking. We have another meeting in early September.’ I said, ‘That’s fine, but until such time as there’s a deal, we’ll be taxing them,” Trump told reporters.
A source familiar with the matter said Trump grew frustrated and composed the tweets shortly after Lighthizer and Mnuchin told him China made no significant movement on its position.
Previous negotiations collapsed in May, when US officials accused China of backing away from earlier commitments.
American business groups in China expressed disquiet over the latest round of US tariffs. The US-China Business Council said on Friday it was concerned the action “will drive the Chinese from the negotiating table, reducing hope raised by a second round of talks that ended this week in Shanghai”.
“We are particularly concerned about increased regulatory scrutiny, delays in licenses and approvals, and discrimination against US companies in government procurement tenders,” said the US-China Business Council’s President Craig Allen in an e-mail.
Ker Gibbs, the president of the American Chamber of Commerce in Shanghai, said that as market access in China “remains unnecessarily restricted”, the United States should continue its dialogue with Beijing, and “also work with like-minded countries to persuade China that fair and reciprocal trade and investment benefits all.”
Crops and drugs
Trump said Beijing had failed to fulfil promises to stop sales of the synthetic opioid fentanyl to the United States, which US officials say was to blame for most of more than 28,000 synthetic opioid-related overdose deaths in the United States in 2017.
He also said Beijing had not followed through on a goodwill pledge to buy more US agricultural products.
The US Department of Agriculture on Thursday confirmed a small private sale to China of 68,000 tonnes of soybeans in the week ended July 25.
The United States also has yet to ease restrictions on US companies’ sales to Chinese telecommunications giant Huawei, which Trump had pledged as a goodwill gesture to Xi after meeting at the G20 in Osaka.