Get ready for the ‘largest trade war in economic history’
US tariffs trigger an angry backlash from the Chinese Commerce Ministry as tensions escalate
It is now the “largest trade war in economic history.” Well, that is Beijing’s take on President Donald Trump’s decision on Friday to impose tariffs worth US$34 billion on a range of Chinese imports, including high-tech equipment and industrial machinery.
In response, the world’s second-largest economy warned it would take the “necessary countermeasures,” triggering what is now a full-blown trade conflict.
“The Chinese side, having vowed not to fire the first shot, is forced to stage counter-attacks to protect the … interests of its people,” the Chinese Commerce Ministry said in a statement. “[The US has started the] largest trade war in economic history.”
As the midnight chimes sounded in the United States, the first wave of tariffs kicked in. Another $16 billion are scheduled to take effect in the next two weeks.
After that, Trump has made it clear he is planning additional duties on Chinese products worth a staggering $500 billion. At the same time, Beijing has reiterated it will roll out tit-for-tat tariffs as tensions rapidly escalate.
For the past three months, the ‘war of words’ between the world’s two largest economies has gathered pace after the White House pledged to cut the ballooning US trade deficit with China.
In May, the figure swelled to US$24.6 billion, which was almost all of China’s total surplus of $24.9 billion, compared to the same period last year. While it fell slightly last month, between January and March it hit $58 billion and a record $375.2 billion in 2017.
But that is only part of Trump’s beef. He has also expressed growing concern about intellectual property rights in high-tech industries, centered around the “Made in China 2025” policy, which aims to turn the country into a technological superpower.
On Thursday, the US president outlined plans to bring in tariffs on more than $500 billion of Chinese imports.
“You have another 16 [billion dollars] in two weeks, and then, as you know, we have $200 billion in abeyance and then after the $200 billion, we have $300 billion in abeyance. OK? So we have 50 plus 200 plus almost 300,” he said.
Beijing has carefully choreographed its response but is now preparing for a full-blown “conflict” on the economic front after a leaked document “purportedly sent to media outlets” was published by China Digital Times and reported by Asia Times.
“All media should prepare for [a] protracted conflict,” the document stated. “Don’t follow the American side’s fluctuating declarations. Play down the correlations between the stock market [slump] and trade [dispute. And] do not make further use of ‘Made in China 2025,’ or there will be consequences.”
Obviously, the state-run China Daily has taken this edict to heart. Following the Chinese Commerce Ministry statement, the English-language media group put up just two paragraphs on its website. It said:
“China imposed counter-tariffs on some import products from the United States at 12:01 pm Friday immediately after new US tariffs took effect, the country’s customs authority said.
“In response to the US announcement to impose additional duties on Chinese imports, the Customs Tariff Commission of the State Council announced it would levy additional tariffs for 545 items worth about $34 billion, including agricultural products, vehicles and aquatic products, starting July 6, 2018.”
Markets in Asia showed remarkable restraint after falling in early trading. Shanghai’s benchmark index, which has struggled in the past seven days, ended 0.46% up at 2,746.48 points, while Shenzhen recovered slightly, rising 0.48%. In Hong Kong, the Hang Seng Index edged 0.47% higher at 28,313.74.
Still, how long that will last is anyone’s guess.