Economy

China hits back at United States with $60bn tariff threat

China hits back at United States with $60bn tariff threat

A general view of a crude oil importing port in Qingdao, Shandong province.

China has already filed a complaint with the World Trade Organization about the USA proposal for tariffs on $200 billion worth of goods.

"We urge the United States to come to its senses, correct its erroneous acts and create the necessary condition for a proper settlement as soon as possible", spokesman Geng Shuang said.

China has now either imposed or proposed tariffs on US$110 billion in USA goods, representing the vast majority of China's annual imports of American products.

"Tariffs are working big time", Trump said in a tweet on Sunday. Every country on earth wants to take wealth out of the US, always to our detriment.

"I told you, some people say, there has been more than 30 phone calls between Trump and Xi".

It was the latest in a series of tariffs, with the first being imposed by Trump back in early February.

Chinese officials are trying to reassure markets and the local population that the US moves would have little impact.

In some ways, the addition of LNG to the list is symbolic. The list of products includes a variety of agricultural goods such as beef, as well as small planes, chemical components, textiles and liquefied natural gas.

Last month, Trump threatened to impose tariffs on all goods imported from China. At about $70 a barrel, this was worth just below $4 billion, giving a potential annual trade of around $8 billion.

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While Trump has taken credit for new steel jobs created with the help of tariffs, retaliatory measures by Beijing and others have rattled USA soybean farmers and the many companies reliant on increasingly expensive steel as a raw material. Yet while the Chinese public and private sectors invest in one another based on the principles of the cyclically prosperous market socialist model, the USA is now being forced to subsidise (aka pay) its own farmers whose industry has been partly stagnated during the early stages of the trade war on China.

Talks with China and Canada, however, have remained very frosty, and Trump has promised to punish both economies if he doesn't get his way. So far, about 203,000 bpd have been booked for arrival next month, according to vessel-tracking data, and the window for more cargoes to be added is closing, given it takes at least three weeks for a tanker to make the journey from the Gulf of Mexico to China's east coast.

The Chinese commerce ministry blamed the United States for escalating the situation. The U.S. can buy more because the economy is strong.

China has overtaken South Korea to become the world's number two importer of the super-chilled fuel behind Japan.

The Post reported that China and the United States held unofficial talks last week but a deep and mutual distrust continues to hamper efforts to de-escalate their trade dispute.

Similar to crude oil and LNG, coal was another area where Trump could have made a difference to US exports to China.

US Secretary of State Mike Pompeo (left) and China's Foreign Minister Wang Yi (right) shake hands during their bilateral meeting at the 51st Association of Southeast Asian Nations (ASEAN) in Singapore on Aug 3, 2018.

However, with the price of Australian thermal coal reaching 6-1/2 year highs, above $120 a tonne, USA exports of this type of fuel used in power stations would have been competitive. The worsening of the tension comes amid a slowing of China's economy, declines in the currency and a bear market in stocks.

"Regardless of a potential breakthrough, we believe that this Chinese trade fight will last well beyond the midterm elections as the reforms sought by the Trump Administration will be hard for China to accept and implement". "Chinese companies would have to pay all the additional costs".

The opinions expressed here are those of the author, a columnist for Reuters.