Caixin
Aug 24, 2019 12:55 AM
ECONOMY

Update: China to Impose New Tariffs on $75 Billion of U.S. Goods

Ministry of Commerce Spokesperson Gao Feng takes questions during a regular ministry press conference on Thursday. Photo: Ministry of Commerce
Ministry of Commerce Spokesperson Gao Feng takes questions during a regular ministry press conference on Thursday. Photo: Ministry of Commerce

China has fought back against the U.S. with a decision to impose new tariffs on $75 billion of American goods, the official Xinhua News Agency reported on Friday.

Some of the new Chinese tariffs, which will be 5% or 10%, will take effect Sept. 1, and the rest, Dec. 15. The move comes in response to the Trump administration’s plan to impose new tariffs on $300 billion of annual Chinese imports.

The new tariffs will affect 5,078 tariff lines, including 1,717 with new tariffs next month and 3,361 in December. An additional 5% tariff will be applied to American soybeans and crude oil imports while an extra 10% will be charged on some pork and beef products starting in September, according to a list published by the Ministry of Finance.

An extra 10% tariff will be levied on some types of automobiles from the U.S. starting Dec. 15. Meanwhile, a suspended 25% duty on U.S. cars will resume Dec. 15, the finance ministry said. That will increase the total taxes on U.S. imported cars to as much as 50%, affecting companies like Tesla Inc.

The news pushed down November soybean futures in Chicago by as much as 0.9% to a two-week low, according to Bloomberg data. The Dow Jones Industrial Average plunged more than 1.3% in late morning after trading higher earlier the day. The S&P 500 Index dipped nearly 1.4% and the Nasdaq lost 1.55% Friday morning.

“China’s decision on the new tariffs is a response to the unilateralism and trade protectionism of the U.S. We insist that cooperation is the only option for China and the U.S.,” the government said in a statement.

In a tweet, President Donald Trump vowed a further response.

"Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon," Trump said.

Any enforcement of new U.S. tariffs will further escalate tensions and China will have to take countermeasures, Ministry of Commerce spokesperson Gao Feng said at a Thursday press conference (link in Chinese). Any escalation will hurt U.S. customers and companies and even increase the chances of a global recession, he said.

Last week, the U.S. government delayed new levies on some Chinese goods until Dec. 15. This decision shows that there are no winners in a trade war, Gao said.

The delay affects Chinese-made products — including cell phones, laptop computers, video game consoles and certain toys — which are among the $300 billion of Chinese imports on which U.S. President Donald Trump vowed to levy additional 10% tariffs, which were initially scheduled to kick in on Sept. 1. The U.S. Trade Representative cited “health, safety, national security and other factors” as to the reason of the delay.

However, Trump told reporters last week that the decision was made “for Christmas season” and he was not considering moving the tariffs again or delaying them further past Dec. 15. Once the latest sets of tariffs are enforced, all of China’s exports to the U.S. will be subject to additional levies.

So far, the U.S. government has imposed additional 25% tariffs on about $250 billion in Chinese goods, while China has imposed additional tariffs on U.S. imports worth $110 billion.

China has accused (link in Chinese) the U.S. of provoking the trade frictions, saying that the additional U.S. levies are “unilateral and protectionist” measures and damage the interests of both countries and the world as a whole.

The Trump administration said the tariffs are to “change (China’s) unfair practices related to the acquisition of American intellectual property and technology” and aim to balance bilateral trade.

Each instance of bad news about the trade war has hit the U.S. and Chinese stock markets and had a knock-on effect on the world economy. An International Monetary Fund report released in May said that the escalation of the trade war could “significantly dent business and financial market sentiment, disrupt global supply chains, and jeopardize the projected recovery in global growth in 2019.”

A survey report by the Federal Reserve Bank of New York released last week said that tariffs have been pushing up business costs and reducing profits in the U.S.

Analysts from research institution Bloomberg Economics estimated that the uncertainties created by the trade war could lower GDP levels in the U.S., China and the world by 0.6, 1 and 0.6 percentage points, respectively, by 2021, compared with a hypothetical scenario in which the trade war didn’t happen.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

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