CARTOON: China and US Bare Trade War Teeth

05 April, 2018, 01:01 | Author: Gladys Mathis
  • Javelin’s Davies discusses markets and his investment

The Chinese Ministry of Commerce said it plans to impose a 25 percent tariff on $50 billion worth of US exports, including aircraft, cars, soybeans, and whiskey. The tariffs on USA soybeans could ultimately drive up costs for Chinese pig farmers and meat prices for 1.3 billion citizens.

Hours earlier, the US government unveiled a detailed breakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25 per cent duties, ranging from light-emitting diodes to chemicals and machine parts. Beijing will reportedly introduce 25 percent levies on 106 American goods, including soybeans, cars, aircraft, beef, cigars and whiskey.

It's a strategy that might just work.

The move comes after Washington slapped almost 1,300 Chinese goods with 25-percent tariffs.

"We maintain our China GDP growth forecast of 6.5 percent given strong Q1 growth and uncertainty on USA remedies", said the report. Other products such as vaccines and antidepressants are on the list of goods that will be hit by tariffs.

Trump said last month trade wars are "easy to win".

And the $3 billion in US products that Beijing targeted Monday amount to barely 2 per cent of American goods exported to China.

The trade showdown between Washington and Beijing has rattled investors and fueled market fears that the dispute could soon spiral into a full-blown trade war. Tariffs on imported goods mean that they become more expensive (and less competitive) in the importing nation.

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"The administration is rightly focused on restoring equity and fairness in our trade relationship with China", said the US Chamber of Commerce.

Investors also worry President Donald Trump's protectionist policy will lead to further reciprocal tariffs by China, undermining global economic growth.

Beijing imposes tariffs on U.S. imports worth around $3 billion, including a 15% duty on 120 American products including fruits, nuts, wine and steel pipes and a 25% tax on eight others, like recycled aluminum and pork.

Cui Tiankai, Chinese Ambassador to the USA, said if another round of tariffs or similar action is taken by Trump on intellectual property then China "will certainly take countermeasures of the same proportion and the same scale, same intensity". The U.S says China treats American companies unfairly by restricting access to its markets and stealing proprietary technology.

China is the world's biggest pork producer and consumer and its industry relies on soybean meal, a product of soybean crushing, to feed its pigs. China heavily subsidizes its own industries, including steel. Technology stocks have turned higher.

"We hope that the USA side, with sense and long-term picture in mind, refrain from going further down the wrong path", the Chinese Embassy in the United States said in a statement on Wednesday.

A trade war may hamper demand for United States assets at a time when there is a growing deficit and a vulnerable dollar in the event of a downturn in United States debt.

Activity in Japan's service sector also grew at its slowest pace in 17 months last month, British shop prices dropped at the fastest pace in more than a year while Australian February building approvals fell 6.2 per cent.

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