Wall Street sinks as China retaliates on tariffs

Andrew Cummings
June 17, 2018

In May, Treasury Secretary Steven Mnuchin said a trade war with the world's second-largest economy was "on hold".

The Chinese have said they will place retaliatory tariffs on US products but have not yet specified which ones.

The U.S. move on 25 percent tariffs, which covered an array of Chinese-made goods from jet engines to dishwasher parts, sent markets plunging on fears of a trade war. The list released by the U.S. Trade Representative's office Friday covered "1,102 separate U.S. tariff lines valued at approximately $50 billion in 2018 trade values".

It added, "There is no victor in a trade war, and the US instigation of a trade war is extremely destructive to global trade, economic globalisation, multilateral trade systems and global production supply chains".

Global industrials Boeing and Caterpillar fell 1.3 percent and 2 percent, respectively.

The announcement came in response to President Donald Trump's own increase in tariffs on Chinese imports in the United States.

ZTE last week agreed to pay a $1 billion fine to the US government to end a crippling supplier ban imposed after it broke an agreement to discipline executives who conspired to evade USA sanctions on Iran and North Korea.

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

The list was slimmed down from a version unveiled in April, dropping Chinese flat-panel television sets, medical breathing devices and oxygen generators and air conditioning parts.

U.S. restrictions will target China's technical industries, including aerospace, robotics, and auto engineering.

Numerous exports are linked to the nation's "Made in China 2025" plan to lead the world in sectors like AI and robotics.

The 28 members of the European Union agreed Thursday that retaliatory tariffs would go into effect in the coming days.

It will also allow companies to apply for exclusions from the duties.

Scott Kennedy, a specialist on the Chinese economy at the Center for Strategic and International Studies, said the Chinese threat was real and helped along by recent strains exhibited between the USA and allies.

"We will be outlining our concerns with the USTR about how these new tariffs will jeopardize this industry". The government will start to collect the tariffs July 6.

However, Trump said in a statement that "additional tariffs" could be levied should China hit back with tit-for-tat duties on U.S. goods and services exports.

The trade war started by the US has damaged not only bilateral interests, but also the global trade order, the People's Daily reported on Saturday.

"We must take strong defensive actions to protect America's leadership in technology and innovation against the unprecedented threat posed by China's theft of our intellectual property, the forced transfer of American technology, and its cyber attacks on our computer networks", Lighthizer said.

"There remains a substantial risk of escalation and a more prolonged dispute that lasts through the summer and into the fall", analysts with Eurasia Group, a political risk adviser, said in a research note.

The news raised alarms around the ME lobster industry, as China's an emerging market for USA lobster, which has gained popularity with the growing middle class. ME lobster was worth more than $430 million (U.S.) at the docks a year ago, and the industry is a critical piece of the state's economy, history and heritage. American officials say they have targeted products that might benefit from Chinese industrial policies.

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