Trade war intensifies with another batch of tariffs

Local | AGENCIES 2 Sep 2019

Washington has moved ahead with more tariffs on Chinese imports as it steps up a campaign to coerce Beijing to sign a new trade deal even amid fears of a further slowing of world growth, including that of the United States.

The additional 15 percent tariffs, affecting a portion of the US$300 billion (HK$2.33 trillion) in goods from China that had been spared, went into effect yesterday.

President Donald Trump had on Friday ruled out any further postponement. "They're on," he said.

The new tariffs target a range of products, from foodstuffs (ketchup, butchered meat, pork sausage, fruit, vegetables, milk, cheese) to sports equipment (golf clubs, surf boards, bicycles), to musical instruments, sportswear and furniture.

Economists at the Washington-based Peterson Institute for International Economics estimate US$112 billion in goods will be affected.

The trade war touched off by Trump last year received its latest jolt last week with the US announcement that all Chinese goods would be subjected to tariffs by year's end.

More than US$250-billion-worth of China's US$540 billion in exports to the United States were already subject to tariffs.

In retaliation, China started to impose additional tariffs on some of the US goods on a US$75-billion target list. Beijing did not specify the value of the goods facing higher tariffs from yesterday.

Extra tariffs of 5 percent and 10 percent were levied on 1,717 items of a total of 5,078 products originating from the United States. Beijing will start collecting additional tariffs on the rest from December 15.

Chinese media struck a defiant note.

"The United States should learn how to behave like a responsible global power and stop acting like a school bully," Xinhua News Agency said. "As the world's only superpower, it needs to shoulder its due responsibility and join other countries in making this world a better and more prosperous place."

Tariffs could not impede China's development, said the People's Daily. "China's booming economy has made China a fertile ground for investment that foreign companies cannot ignore," it said in a commentary.

Many US companies and professional groups had appealed to the Trump administration to postpone new tariffs, saying they would cost jobs and burden consumers.

But the Republican president said those complaining were themselves partly at fault. "Badly run and weak companies are smartly blaming these small tariffs instead of themselves for bad management," he tweeted.

Dismissing any idea of postponing the tariffs, Trump nonetheless offered a glimmer of hope in the form of continuing talks, saying: "Meetings are scheduled. Calls are being made."

Days earlier, Trump caused consternation when he tweeted "I hereby order" US companies to stop doing business with China. His aides quickly sought to dial it back.

The president launched his trade war in March 2018, demanding China end practices seen as unfair, such as forced technology transfers from US firms and huge subsidies for Chinese enterprises.

While the strategy is clearly weighing on China's economy, it has produced few positive results.

A further round of tariffs could cut Chinese growth sharply, the International Monetary Fund predicted recently, and continuing tensions could spark a global slowdown.

Yet Chinese leaders have shown little inclination to give in and talks have been at an impasse for months.

At the recent G7 meeting in France, Trump spoke of new communications between US and Chinese negotiators, but Beijing officials said they were unaware of such contacts.

While Trump insists the American economy has been unaffected by the trade war, he has identified a culprit should things slow down: the US Federal Reserve.

For now, though, the US economy is doing well to judge by GDP growth and still-low inflation.

But the trade war has weighed on company investment practices and consumer confidence - which in August marked its sharpest decline since December 2012, according to a University of Michigan study.

"The August data indicate that the erosion of consumer confidence due to tariff policies is well under way," said Richard Curtin, an economist who directs the Michigan survey.

In a sign of administration concern about the impact of the new tariff round - particularly ahead of the Christmas shopping season - some Chinese products will not be affected until December 15. They include phones, laptop computers and some toys.

American consumers account for 75 percent of GDP growth.

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