Looming Trade War Could Hurt US-China Cooperation On North Korea
- Author: Anthony Vega Jun 22, 2018,
Jun 22, 2018, 3:24
The China trade offensive is only one side of Trump's multi-front battle with the United States' economic partners as he presses ahead with his protectionist "America First" agenda.
Stocks are trading lower at midday Tuesday on fresh worries about a trade dispute between the USA and China, although they've recovered somewhat from an early slump.
"This all shows how quickly trade tensions could escalate between the USA and China", said Derek Halpenny, European head of global markets research at MUFG Bank.
China's proposed tariffs on United States petroleum imports, part of a mounting trade war between the two countries, would crimp sales to the shale industry's largest customer, adding new pressure on USA crude prices, energy executives and analysts said in interviews this week. China retaliated swiftly by announcing reciprocal tariffs on USA products, ranging from soybeans and autos to seafood. The White House said on Monday evening that if China goes through with its promise to retaliate against the U.S. tariffs announced last week, Washington will impose new tariffs, the Washington Post reported.
Combined, the potential tariffs on Beijing could reach $450 billion - an amount equal to 89 percent of Chinese goods imported to the United States past year.
These tariffs are not set to come into effect until July 1, as consultation on the final list ended late last week.
In a separate statement, Lighthizer said that he supported Trump's action and that his agency "is preparing the proposed tariffs to offset China's action".
"Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States". It said Beijing also was scrapping agreements to narrow its multibillion-dollar trade surplus with the United States by purchasing more American farm goods, natural gas and other products. Asian stocks had been poised for a mixed start to trading that sees Chinese markets reopen for the first time since trade tensions with the US escalated.
The Dow Jones Industrial Average index was in the deep red shedding 338 points to 24,649, led lower by large caps exposed to the Chinese market. In 2017, the company generated 20 percent of its sales in Greater China, accumulating about $45 billion.
The report said housing starts spiked by 5.0 percent to an annual rate of 1.350 million in May after tumbling by 3.1 percent to a revised rate of 1.286 million in April.
"Such practice of imposing extreme pressure and blackmailing is contrary to the consensus the two sides have reached through rounds of consultations, and disappoints the worldwide community", a Ministry of Commerce spokesperson said.
"If the USA acts irrationally and issues a list, China will have no choice but to take comprehensive measures of a corresponding number and quality and take strong, powerful countermeasures", the ministry said.
"As I've said from the beginning, China will back off its industrial plans only when USA trade measures are large and lasting enough to threaten the influx of foreign exchange", he said.
Trump said if China increases its tariffs again in response to the latest USA move, "we will meet that action by pursuing additional tariffs on another $200 billion of goods".
But Beijing's mention of "comprehensive measures" suggests that it would go beyond tariffs, said Jake Parker of the U.S.
Shares of Chinese companies listed in the US slumped.
Economists have said the impact on the US economy would be muted. US crude fell 1.6 percent to $64.80 a barrel in NY, and Brent crude, the global standard for oil prices, fell 0.5 percent to $74.94 a barrel in London.
Russia's Economy Minister, Maxim Oreshkin, said the tariffs would target goods of which the Russians already had domestic equivalents. Cresset's Ablin said Trump may be willing to suffer near-term pain in commodities in a spat that is "less about soybeans and more about intellectual property". The next step will be for the Office of the U.S. Trade Representative to identify the Chinese goods to be penalized and to conduct a legal review. Those tariffs won't take effect until July 6, which leaves the countries more time to negotiate.