WASHINGTON/BEIJING (Reuters) – China said on Monday it would impose higher tariffs on a range of U.S. goods including frozen vegetables and liquefied natural gas, striking back in its trade war with Washington after U.S. President Donald Trump warned it not to.
The move, widely expected after the United States last week raised tariffs on $200 billion in Chinese imports, heightened fears the world’s two largest economies were spiraling into a no-holds-barred dispute that could derail the global economy.
China’s finance ministry said it plans to set import tariffs ranging from 5% to 25% on 5,140 U.S. products on a revised $60 billion target list. It said the tariffs will take effect on June 1.
“China’s adjustment on additional tariffs is a response to U.S. unilateralism and protectionism,” the ministry said. “China hopes the U.S. will get back to the right track of bilateral trade and economic consultations and meet with China halfway.”
The White House and U.S. Trade Representative’s office did not immediately respond to requests for comment.
Global equities, which slumped last week on the escalating tensions, fell sharply, with major U.S. indexes down more than 2 percent. Investors sought safety in U.S. bonds while the U.S. dollar slipped against a basket of currencies. [MKTS/GLOB]
“It’s clear that there is a lot of nervousness around the U.S.-China trade negotiations and concern that it’s really deteriorating pretty significantly, and that’s impacting all areas of markets,” said Kristina Hooper, chief global market strategist at Invesco in New York.
Earlier on Monday, Trump told China not to intensify the trade dispute and urged its leaders, including President Xi Jinping, to continue to work to reach a deal. “China should not retaliate-will only get worse,” he said on Twitter.
“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” Trump wrote.
The U.S. president, who has embraced protectionism as part of an “America First” agenda, stepped up his verbal attacks on China on Friday after two days of high-level trade talks in Washington ended with the two sides at an apparent stalemate.
STEADY DRUM BEAT
Trump has accused Beijing of reneging on commitments it made during months of trade negotiations, which Beijing has denied.
China tried to delete commitments from a draft agreement that its laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers. That dealt a major setback to the talks.
In the middle of the talks last week, Trump hiked tariffs on Chinese goods to 25% from 10%. Those tariffs affect 5,700 categories of Chinese products including internet modems, routers and similar devices.
In the wake of the failure of the talks, Trump ordered U.S. Trade Representative Robert Lighthizer to begin the process of imposing tariffs on all remaining imports from China, a move that would affect another $300 billion worth of goods.
China said it would “never surrender” to external pressure.
Chinese state media kept up a steady drum beat of strongly worded commentary on Monday, reiterating that China’s door to talks was always open, but vowing to defend the country’s interests and dignity.
In a commentary, state television said the effect on the Chinese economy from the U.S. tariffs was “totally controllable.”
“It’s no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger.”
Trump has defended the U.S. tariff hike and said he was in “absolutely no rush” to finalize a deal with China.
Despite Trump’s insistence China will absorb the cost of the tariffs, it is U.S. businesses that will pay them and likely pass them on to consumers. It may take three or four months for that pain to be felt, economists and industry consultants say.
At the same time, the Trump administration has rolled out up to $12 billion in aid for U.S. farmers hurt by Chinese tariffs against U.S. soybeans and other agricultural products during the 10-month trade war, and indicated that more could be on the way.
Separately, the U.S. Commerce Department said on Monday six Chinese technology entities were among those it had banned from exporting sensitive U.S. technologies and other goods.
Top White House economic adviser Larry Kudlow said on Sunday there was a “strong possibility” Trump will meet China’s Xi at a G20 summit in Japan in late June.
Reporting by Ben Blanchard; Additional reporting by Makini Brice and David Lawder in Washington and Alden Bentley in New York; Writing by Paul Simao; Editing by Darren Schuettler, Jeffrey Benkoe and Susan Thomas