China and U.S. fire first salvos in a long haul trade war

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China and U.S. fire first salvos in a long haul trade war

“The U.S. has started the largest trade war in history,” China’s Ministry of Commerce said on its website, after President Donald Trump threatened to incrementally increase tariffs on the entire range of Chinese exports.

China on Friday joined the trade war with the United States, by announcing it was ready for a long campaign after authorities in Washington declared a 25 % additional levy on Chinese products worth $ 34 billion.

The Chinese have retaliated in equal measure, opening the possibility of tit-for-tat tariff escalation, which could disrupt existing international network of supply chains, and slow down the global economy, which was yet to fully recover from the 2008 recession.

“The U.S. has started the largest trade war in history,” China’s Ministry of Commerce said on its website, after President Donald Trump threatened to incrementally increase tariffs on the entire range of Chinese exports, worth more than $500 billion, in case Beijing retaliated.

Speaking on Air Force One, during his visit to Montana on Thursday, Mr. Trump said additional Chinese products worth $ 16 billion would face additional duties “in two weeks”.

He added: “We have $200 billion in abeyance and then … we have $300 billion in abeyance. OK? So we have 50 plus 200 plus almost 300.”

The Chinese retaliation followed immediately after the U.S. Trade Representative (USTR) issued a note that stated that any goods that entered the country or were pulled out of warehouses after 12:01 a.m., Eastern Time, would face the new tariff regime. The latest set of levies target 818 Chinese product lines in industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials and automobiles, USTR list released earlier had stated.

In mid-June the Chinese commerce ministry had declared that 545 types of U.S. products of equal value, including soyabeans, automobiles and seafood, would face an additional tariff of 25 %.

Analysts say that the US is targeting the Made-in-China 2025 project — an initiative that can make Beijing a market leader in sunrise hi-technology areas, including robotics, semiconductors, electric vehicles, drones and products powered by Artificial Intelligence (AI).

By restricting its market for hi-end products, the U.S. hopes that this would deter its companies, with cutting edge technology, from investing in China. The U.S. has earlier charged Beijing of forcing American companies to part with their intellectual property, which can be funneled into the Made-in-China 2025 project, as a precondition for doing business in China.

A statement released on the Chinese commerce ministry website warned that the U.S. was indulging in “bullying”. It asserted that Washington’s move would trigger market turmoil across the globe, obstruct economic recovery, and pose a “grave threat” to the security of industrial value chains.

The new U.S. market restrictions are likely to have a downstream impact in other countries, as China-based export firms outsource parts and sub-assemblies from other world locations.

During a visit to Sofia, Bulgaria, Chinese Prime Minister Li Keqiang told reporters that, “China would never start a trade war but if any party resorts to an increase of tariffs, then China will take measures in response to protect development interests.”

On Friday, Chinese state-media went ballistic as Mr. Trump fired the first salvo of a trade war. Sate-run China Daily, called the Trump administration “a gang of hoodlums with its shakedown of other countries, particularly China”.

In a commentary, the state-run tabloid Global Times said that China was ready for a fight. “If the US is determined to escalate conflicts with China, then so be it. Perhaps the Trump can only clear its mind after a fight.”

(Except for the headline, this story has not been edited by Daily Report and is published from a The Hindu.)

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