China warns it could retaliate with tariffs on $60B

Fredrick Soto
August 4, 2018

President Donald Trump asked the US Trade Representative to consider increasing the proposed tariffs to 25 percent from the planned 10 percent, USTR Robert Lighthizer said on Wednesday.

General Electric (GE.N) estimated the new tariffs on its imports from China could raise its costs by $300 million to $400 million overall, before steps to lessen the impact while General Motors Co (GM.N), Ford Motor Co (F.N) and Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) have lowered their full-year profit forecasts.

The 25 per cent tariffs on $200 billion worth of imports would come on top of the existing penalties on $34 billion worth of products and an additional $16 billion that are scheduled to go into effect soon, The New York Times reported.

"China is forced to take countermeasures", said a ministry statement.

Oil Price.com, an industry site, reports that China said on Wednesday that it would respond with quick retaliation if the USA moves forward with higher tariffs. Because China imports far less from the US than the USA imports from China, it can't keep up tit-for-tat tariffs. The Asian economic giant has shown no signs of backing down from Trump's threats, and is said to be considering other types of retaliation, such as tougher inspections on American imports and delaying licensing and approvals for mergers.

Officials, however, downplayed suggestions the move was meant to compensate for the recent decline in the value of the Chinese currency, which has threatened to take much of the sting out of Trump's tariffs by making imports cheaper.

This wave of tariffs would include a wide range of products, from dog food to furniture, bicycles to beauty products.

"The increase in the possible rate of the additional duty is meant to provide the Administration with additional options to encourage China to change its harmful policies and behavior", Lighthizer wrote.

Administration officials at the time said the tariff fight was aimed at forcing China to stop stealing American intellectual property and to abandon policies that effectively force US companies to surrender their trade secrets in return for access to the Chinese market. Over the past year Trump has challenged the rules that govern worldwide trade, hitting WTO members with billions of dollars of tariffs and blocking nominees to WTO's dispute-resolution panel. After the earlier tariffs $34 billion of US goods, about $120 billion is available for retaliation.

White House officials had hoped Trump's latest threat would frighten Chinese officials into negotiations, where Trump aims to secure more favorable terms for US manufacturers in one of the world's largest marketplaces.

The United States has already imposed 25% tariffs on Chinese goods worth $34 billion.

"They better not underestimate the President", Mr Kudlow said in an interview on Fox Business Network.
"This has gone on for long enough and he's going to do something about it".

Two trump administration officials told reporters on a conference call that Trump remains open to communications with Beijing and that through informal conversations the two countries are discussing whether a "fruitful negotiation" is possible.

Further roiling the trade debate is the falling value of the Chinese currency, which makes its exports cheaper around the world.

In an effort to soften relations, Trump directed Commerce Secretary Wilbur Ross to ease restrictions on ZTE Corp., a major Chinese telecommunications company that had been penalized for violating USA sanctions against Iran and North Korea and then lying to US investigators about its actions.

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