Trade war with US hots up as China targets $34bn of goods

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China fired back yesterday in a spiralling trade dispute with President Donald Trump by raising import duties on a $34 billion list of American goods, including soybeans, electric cars and whiskey

The government said it was responding in “equal scale” to Trump’s tariff hike on Chinese goods in a conflict over Beijing’s trade surplus and technology policy that companies worry could quickly escalate and chill global economic growth.

China “doesn’t want a trade war” but has to “fight back strongly”, said a commerce ministry statement. It said Beijing was also scrapping agreements to narrow its multibillion-dollar trade surplus with the US by purchasing more American farm goods, natural gas and other products.

The US and China have the world’s biggest trading relationship but official ties are increasingly strained over complaints Beijing’s industry development tactics violate its free-trade pledges and hurt American companies.

Europe, Japan and other trading partners raise similar complaints, but Trump has been unusually direct about challenging Beijing and threatening to disrupt such a large volume of exports.

“In this trade war, it’s the US who is playing the role of provocateur, while China plays defence,” said the Global Times, a newspaper published by the ruling Communist Party. “China is a powerful guardian and has enough ammunition to defend existing trade rules and fairness.”

Beijing will impose an additional 25 per cent tariff starting on 6 July on 545 products from the US, including soybeans, electric cars, orange juice, whiskey, lobsters, salmon and cigars, according to the ministry of finance.

Most are food and other farm goods, hitting Trump’s rural supporters hardest.

Beijing appeared to be trying to minimise the impact on its economy by picking US products that can be replaced by imports from suppliers such as Brazil or Australia.

Chinese regulators also are considering a tariff hike on an additional 114 products including medical equipment and energy products, the finance ministry said. It said a decision would be announced later.

That mirrored the Trump administration’s announcement on Friday of a tariff hike on $34bn of Chinese goods, also due to take effect on 6 July, and plans to consider widening it to an additional $16bn.

China’s heavily regulated economy also gives the ruling Communist Party additional options for retaliation by withholding approval for business activity.

Anti-monopoly regulators are believed to have delayed announcing a decision on US tech giant Qualcomm’s proposed acquisition of semiconductor-maker NXP in part due to the tariff conflict. Other companies say the approval process for licences has slowed down.

“China’s retaliation will remain calibrated and largely reciprocal, with President Xi Jinping ready to counter any move by Trump,” said Eurasia Group in a report. “Beijing has a freer hand for informal retaliation, which will now start to increase.”

The American Chamber of Commerce had appealed to Washington to avoid a tariff hike but said Trump’s threat has prompted Beijing to engage in more intensive negotiations than it had in recent years. Companies also are watching the fate of ZTE, a Chinese maker of telecoms gear that ran foul of US regulators after it violated restrictions on exports of US technology to Iran and North Korea.

Trump is pressing Beijing to narrow its trade surplus with the US and roll back its plans for state-led development of Chinese global competitors in technology fields including electric cars, renewable energy, artificial intelligence and biotech.

The US, Europe, Japan and other trading partners complain Beijing’s tactics include outright theft of foreign technology and subsidies and protection from competition for fledgling Chinese industries. They say these violate Chinese market-opening commitments under the World Trade Organisation.

Tensions eased temporarily after Chinese negotiators agreed at talks in Washington in May to buy more American farm goods, natural gas and other products.

The dispute revived after the White House renewed its plan for a tariff hike on $50bn of Chinese goods as part of the technology dispute.

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