US Farmers Caught in Between Tariffs on China and Foreign Retaliatory Tariffs

Cheryl Sanders
July 13, 2018

"The US side is firing at the whole world as well as itself", remarked Hua Chunying at the regular press briefing in response to the China-US trade war which has triggered concerns worldwide, echoing a similar statement made by Commerce Ministry spokesperson Gao Feng last week.

In a written statement, the trade ministry said Seoul has already reflected U.S. demands in the auto sector in the recently revised bilateral trade deal and Korean automakers contribute to the United States economy by manufacturing cars in their American factories. It said Beijing would take unspecified "necessary countermeasures" to protect its "core interests".

The $200 billion far exceeds the total value of goods China imports from the United States, which means Beijing may need to think of creative ways to respond to such US measures. The proposed list of goods includes consumer items such as clothing, television components and refrigerators as well as other technology products.

Shanghai markets were hardest hit overnight, with stocks there down nearly 2 per cent and the yuan weakening towards last week's 11-month lows, down 0.4 per cent to 6.66 per dollar. They warned it will be hard to contain spillover effects if the dispute worsens from here, risking "a much bigger disruption to global production and trade activity, affecting investment incentives and dragging on global economic growth".

An all-out trade war with China could affect a third of all US imports, data from Deutsche Bank Torsten Slok show.

The US complains that China uses predatory practices in a push to challenge American technological dominance.

The economic impact of the conflict already is spreading.

Washington, DC, July 11, 2018-Flooring is included on a list of products imported from China that could face tariffs of 10% from the U.S. They have given no indication when they might meet again.

The additional tariffs could affect as much as $468bn in trade between the two countries, with the possibility of an ever more expansive levies that US President Donald Trump threatened to impose on China.

Asked what Beijing would do, foreign ministry spokeswoman Hua Chunying gave no details but said: "We will take firm and forceful measures".

'TARIFFS ARE TAXES' Senate Finance Committee Chairman Orrin Hatch, a senior member of Trump's Republican Party, said the announcement "appears reckless and is not a targeted approach".

But it could interfere with American automakers and retailers who see China as a key market by regulating import licenses or investigating US firms for tax, environmental, and antitrust concerns, according to the Associated Press. "We can not turn a blind eye to China's mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy".

The new round would be a 10 percent tariff on another $200 billion in Chinese goods.

The move made good on the president's threat to respond to China's retaliation for the initial USA tariffs on $34 billion in Chinese goods, which went into effect on Friday. The first round of tariffs covered Chinese products ranging from farming plows to machine tools and communications satellites.

On top of that, selling off China's Treasuries would lower the value of the USA dollar relative to the Chinese yuan. "Should the additional tariff take effect, it would increase tariffs on Chinese imports on average by 6.5 percentage points, which would reduce China's exports to the USA by 8.6 percent and drag on GDP growth by 0.2 percent via the trade channel". China has vowed to retaliate dollar-for-dollar to any further US tariffs.

Head of USA equity strategy at JP Morgan, Dubravko Lakos-Bujas, said: "Despite trade headlines, S&P 500 companies should deliver robust earnings on above-trend revenue growth and sharply higher margins".

Asian stock markets fell sharply on Wednesday as investors shunned risk amid escalating trade tensions between the two economic giants. According to UBS, the new tariffs were structured to allow for fast implementation, and the bank said it's now likely the U.S. will follow through on its threat.

The Trump administration has complained that USA companies are forced to hand over key technology to access China's market.

The Commerce Ministry on Wednesday gave no details, but Beijing responded to last week's USA tariff hike on $34 billion of imports from China by increasing its own duties on the same amount of American goods. "There is no justification for such action", Mr Lighthizer said.

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