China vows it won’t back down after trump’s latest tariff threat

The Trump administration is considering raising the proposed tariff in a bid to force China back to the negotiating table

By BLOOMBERG

WASHINGTON • China said the latest threat by the US to increase tariffs won’t succeed in forcing concessions from Beijing.

“China is fully prepared and will have to retaliate to defend the nation’s dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries,” China’s Ministry of Commerce (Mofcom) said in a statement yesterday on its website. The “carrot-and-stick” tactic won’t work, it said.

The Trump administration said on Wednesday that it’s considering increasing the proposed tariff on US$200 billion (RM820 billion) in Chinese imports to 25% from 10%, in a bid to force China back to the negotiating table. President Donald Trump has asked US Trade Representative Robert Lighthizer to consider hiking the duties, which could be implemented as early as next month.

China’s yuan extended loss following Mofcom’s comments, signalling investor concern that the trade war is escalating. The onshore currency tumbled 0.35% to 6.8494 per dollar, the lowest level in more than a year, as of 5:58pm in Shanghai yesterday. The offshore rate lost 0.58%. Earlier, shares in Asia fell.

The US had indicated it is open to restarting formal negotiations with China, though Beijing must agree to open its markets to more competition and stop retaliating against US trade measures.

Along with its pledge to fight back, China also left the door open for a resumption of negotiations. The statement also left out language that had been used previously pledging to fight back using the “same scale, same intensity” as the US trade measures.

“China has consistently advocated resolving differences through dialogue, but only on the condition that we treat each other equally and honour our words,” the ministry said.

“The Chinese side always believes that bad things can turn into good things and challenges can be turned into opportunities.”

The proposed higher tariff “is intended to provide the administration with additional options to encourage China to change its harmful policies and behaviour and adopt policies that will lead to fairer markets”, Lighthizer said in an emailed statement on Wednesday.

Bloomberg reported on Tuesday that the administration was considering boosting tariffs to 25%. The US is open to renewing formal negotiations with China, though Beijing must agree to open its markets to more competition and stop retaliating against US trade measures, according to two senior administration officials who briefed reporters on the condition of anonymity.

The move to more than double the proposed tariff may inflame already heightened tensions between the world’s two largest economies. The International Monetary Fund has cited escalating trade disputes as a growing downside risk that’s threatening the strongest global economic upswing in seven years.

Asian stocks declined as trade worries came back to the fore, with China and Hong Kong equity indexes leading declines.

Increasing the pressure on China by threatening even higher tariffs could backfire. Beijing responded to news reports on Tuesday about the planned tariff increase by cautioning the US against “blackmailing and pressuring” and it vowed to strike back at every escalation.

The administration last month released a list of thousands Chinese products it wants to slap with an additional 10% in tariffs, ranging from television components to handbags and seafood to baseball gloves. The duties could take effect after the administration draws up its revised, final list of imports following a public comment period. Hearings are scheduled for Aug 20 to 23 and the comment period has been extended to Sept 5 from late August, according to Lighthizer’s office.

The first wave of 25% tariffs on US$34 billion of Chinese goods took effect last month, prompting immediate in-kind retaliation from China, and the next round on US$16 billion could be implemented by the US in the coming days or weeks.