China vows to counter Trump’s tariff threat as trade rift widens

Bloomberg

Beijing pledged to respond if the US insists on adding extra tariffs to the remainder of Chinese imports, as President Donald Trump’s abrupt escalation of the trade war between the world’s largest economies sent stocks tumbling across three continents.
Trump announced that he would impose a 10% tariff on a further $300 billion in Chinese imports, a move set to hit American consumers more directly than his other tariffs so far. The new duties, which Trump said could go “much higher,” will be imposed beginning September 1 on a long list of goods expected to include smart-phones, laptop computers and children’s clothing.
“China has to do a lot of things to turn it around,” Trump said at an event on Friday. “Frankly if they don’t do it I could always increase it very substantially.”
“If the US is going to implement the additional tariffs, China will have to take necessary countermeasures,” Foreign Ministry spokeswoman Hua Chunying said at a regular briefing in Beijing on Friday. She didn’t elaborate on what the measures would be.
“China won’t accept any maximum pressure, threat, or blackmailing, and won’t compromise at all on major principle matters,” Hua said.
The S&P 500 Index fell for a fifth straight day, recording the biggest weekly decline of the year. The Stoxx Europe 600 index also slumped, as did equity markets in Asia. The offshore yuan moved closer to a record low.
White House economic adviser Larry Kudlow, in an interview on Bloomberg Television, confirmed the administration is planning to impose the 10% tariff on some Chinese imports on September 1, but signaled there’s a chance it might not. “A lot of good things can happen in a month,” he said.
The threat to tax practically all US imports from China marks the biggest escalation so far taken by the Trump administration and brings a surprise end to a truce that had only been in place since he met Xi Jinping, his Chinese counterpart, in Osaka at the end of June.
Bureaucrats in Beijing were stunned by Trump’s announcement, according to Chinese officials who’ve been involved in the trade talks.
China’s Foreign Minister Wang Yi made the first official response to Trump’s escalation earlier on Friday.
“Imposing new tariffs is absolutely not the right solution to trade frictions,” he told a local Chinese television station while attending an Asean meeting in Bangkok.
The strained relationship between Washington and Beijing is showing up in economic data. Through the first six months of the year, China was the third-largest US trading partner, trailing Mexico and Canada and slipping from the top spot it held in 2018. America’s merchandise trade deficit with China widened in June to a five-month high despite Trump’s effort to narrow it.
China’s response is complicated by the fact that the Communist Party’s top leadership is likely decamping this week to the seaside resort of Beidaihe for their annual two-week policy conclave. Officials from Xi downward disappear from public view as they privately debate policy.
“For the Chinese, Trump is losing his last bit of credibility here, and whether the talks can be held in September as scheduled has been put into question,” said Zhou Xiaoming, a former Commerce Ministry official and diplomat. “Deal or no deal, China is prepared for the worst-case scenario.”
In a tweet, Trump said China had not lived up to a promise Xi made in Osaka to buy US agricultural goods and to halt illegal exports of fentanyl. The president later told reporters he’s “not concerned at all” about the negative reaction from markets.
Trump has repeatedly complained that China hasn’t made the “large quantities” of agricultural purchases that he claims Xi promised when then they met in Osaka, but what was actually promised has never been made public and the two sides’ interpretations appear to differ.
China’s purchases from US farmers have clearly declined over the past year, with buying of soybeans falling in the first half of this year to the lowest level in more than a decade. At the same time, over the last two weeks China has approved the purchase of up to 3 million tons of soybeans, 50,000 tons of cotton, corn and sorghum from the US as part of “goodwill” measures.
Not Enough
Six people familiar with the discussions said that during meetings with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin in Shanghai earlier this week the Chinese side had made no new proposals. That had left the way out of an impasse in talks over the substance of a deal that the two sides hit in May unclear, which prompted the administration to decide to increase pressure further on Beijing at a White House meeting Thursday.
Trump said there were no plans to reverse a decision made in Osaka to allow more sales by US suppliers of non-sensitive products to blacklisted Chinese telecoms giant Huawei Technologies Co.
In a series of tweets announcing the new tariffs, Trump left the door open to further talks. “We look forward to continuing our positive dialog with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!” he said.
Both China and the US said after this week’s talks that their negotiators would regroup in Washington in early September. People close to the administration said they were still planning for those talks to go ahead.

‘More tariffs won’t help solve trade issue’
Bloomberg

The latest tariff move by the US has “seriously breached” the truce that Presidents Donald Trump and Xi Jinping agreed in Japan in late June and isn’t doing any good to trade talks, according to a People’s Daily commentary.
“It deviates from the correct track and is not conducive to solving the problem,” the paper, mouthpiece of the Communist Party said on Saturday. “The Chinese side is strongly
dissatisfied and resolutely opposed.”
“The US’s escalation of trade frictions and tariffs are inconsistent with the interests of the Chinese and American people and the interests of the world and will have a declining impact on the world economy,” according to the commentary. “China is committed to international cooperation, but is not afraid of any extreme pressure.”
In a tweet, Trump said China hadn’t lived up to a promise Xi made in Osaka to buy US agricultural goods and to halt illegal exports of fentanyl.
Chinese companies are making inquiries to buy more American farm products, the paper said. The country is willing to strengthen its cooperation with the US on drug control, and is cracking down on illegal production and smuggling of fentanyl, it said.
The US needs to examine why it has an opioid crisis instead of blaming China, according to the commentary.