All-Out Trade War: China Strikes Back With 25% Tariffs On $50BN Of US Imports

Beijing wasted no time in striking back at Washington’s latest round of tariffs on Chinese imports by announcing a new list of US products that would be subject to punitive action, as the world’s two largest economies edge ever closer towards an all-out trade war.

China’s State Council said on Wednesday it planned to impose additional tariffs of 25% on 106 US products imported into the country, including soybeans, airplanes, cars, and chemicals, CCTV reported. The Ministry of Commerce said the import value of the goods on the list in 2017 was $50 billion. The effective date will depend on when the U.S. action takes effect.

Beijing’s retaliation came just hours after the United States Trade Representative Office released details of hundreds of Chinese imports worth about $50 billion that it planned to hit with 25% tariffs, with the emphasis on industrial and hi-tech goods.

"China’s response was tougher than what the market was expecting - investors didn’t foresee the country levying additional tariffs on sensitive and important products such as soybeans and airplanes," said Gao Qi, Singapore-based strategist at Scotiabank. "Investors believe a trade war will hurt both countries and their economies eventually."

As reported last night, the US list covers 1,300 items, including high-definition colour video monitors, electromagnets used in MRI machines, aerospace products, and machinery used to make processed textiles, printed products and food.  Beijing responded immediately to the US announcement saying it would “take corresponding measures of equal scale and strength against US products in accordance with Chinese law”.

USTR developed the tariff targets using a computer algorithm designed to choose products that would inflict maximum pain on Chinese exporters, but limit the damage to U.S. consumers. A USTR official said the list got an initial scrub by removing products identified as likely to cause disruptions to the U.S. economy and those that needed to be excluded for legal reasons.

“The remaining products were ranked according to the likely impact on U.S. consumers, based on available trade data involving alternative country sources for each product,” the official, who spoke on condition of anonymity, told Reuters.

USTR did include some key consumer products from China, including flat-panel television sets and motor vehicles, both electric and gasoline-powered with engines of 3 liters or less. A Reuters analysis that compared listed products with 2017 Census Bureau import data showed $3.9 billion in flat-panel television imports, and $1.4 billion in vehicle imports from China.

Among vehicles likely to be hit with tariffs is General Motors Co’s Buick Envision sport-utility vehicle, which is assembled in China and sold in the United States. Volvo, owned by China’s Geely Motors, also exports Chinese-built vehicles to the United States.

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As Reuters notes, unlike Washington’s list, which was filled with many obscure industrial items and "in process" goods - from light-emitting diodes to chemicals and machine parts - China’s list strikes at signature U.S. exports.

China's foreign ministry spokesman Geng Shuang said China had shown sincerity in wanting to resolve the trade dispute through negotiations.

“But the best opportunities for resolving the issues through dialogue and negotiations have been repeatedly missed by the U.S. side,” he told a regular briefing on Wednesday.

We regret that soybeans are on the list. We have done everything to prevent this from happening, but we are still calling for a resolution,” said Zhang Xiaoping, China director of the U.S. Soybean Export Council told Reuters.

To be sure, the unexpected inclusion of soybeans on the list of Chinese tariffs - a sign that Beijing has no intention at diplomatically ratcheting up the heat - sent the price of soybeans tumbling as much as 5.3%, the biggest drop since July 2016. Wheat, corn, cotton were also down.

The reason for the plunge in soy prices is that China buys about a third of the entire U.S. crop, using it largely to feed 400 million or so pigs. Argentina and Brazil are the other suppliers, but analysts warn that's not enough to meet the entire Chinese demand.

Paradoxically, by limiting soybean imports, China risks unleashing food inflation and roiling social stability on the mainland, by far the single most important variable for any Chinese administration.

There was some good news: many consumer electronics products such as cellphones made by Apple and laptops made by Dell were excluded, as were footwear and clothing, drawing a sigh of relief from retailers who had feared higher costs for American consumers. A U.S. industry source said the list was somewhat unexpected in that it largely exempts major consumer grade technology products, one of China’s major export categories to the United States. “The tech industry will feel like overall it dodged a bullet,” the source said, but added that traditional industrial goods manufacturers, along with pharmaceuticals and medical device firms could suffer.

In any case, the speed with which the trade war between Washington and Beijing is escalating up – the Chinese government took less than 11 hours to respond with its own measures – led to a furious selloff in global stock markets and commodities: U.S. stock futures plunged over 1.5%, the Dow tumbled over 450 points and the dollar briefly extending early losses. China’s yuan skidded in offshore trade. Boeing was among the biggest losers, tumbling 6% premarket, after China's announcement, as the Dow-heavy aerospace giant had been mentioned as one of the biggest casualties from an all out trade war.

Comments

junction Kamehameha Wed, 04/04/2018 - 06:04 Permalink

You mean like the slave labor performed by inmates in American prisons, where the salary peaks out at 25 cents an hour?  Or the state prisoners forcibly recruited by California prison authorities to fight wildfires, the inmates having little or no training and badly equipped?  Well, what is your answer?  Thieves are the same the world over,  here or in China.

In reply to by Kamehameha

Oldwood beemasters Wed, 04/04/2018 - 07:54 Permalink

China already tarrifs EVERYTHING it imports, while we tariff nearly nothing.

Classic. China keeps punching and slapping us in the face daring us to punch back, while many Americans cower in fear begging us to not "start a fight".

It would be funny if not so sad that the supposedly most powerful nation in the world is so poor, so broke, so weak and so afraid of a fight, after instigating wars around the globe for decades.

Americans have devolved into a bunch of pussies afraid of losing ANYTHING while in reality losing EVERYTHING of any REAL value....like dignity, honesty, independence and LIBERTY. Just give me my cheap TV and low cost cable and internet. I will eat shit, live in shit and lie in shit as long as I am properly ENTERTAINED.

In reply to by beemasters

Brazen Heist Oldwood Wed, 04/04/2018 - 08:47 Permalink

How are tariffs going to improve American productivity in the long run?

The answer is, they won't.

This is yet more stoopid American turd-throwing that will backfire. But "backfire" is not something taken into account by the exceptional ones. 

I'm fucking sick of all these American global temper tantrums that are going nowhere. Blaming foreigners for the mess Americans made in the first place, is not going to solve problems. 

In reply to by Oldwood

Dancing Disraeli Oldwood Wed, 04/04/2018 - 08:53 Permalink

Speak for yourself.

I LOVE what Trump is doing.  It's called fighting back, and it is way overdue.

I'll take the pain in the short term, as we rebuild our manufacturing base.

The ultimate goal is to return to one-income breadwinners, so that women can go back to doing what's really important, which is child rearing.

Long term, that is the single most impactful cultural/economic thing that can be done to return us to being a stable, virtuous society.

In reply to by Oldwood

GUS100CORRINA Haboob Wed, 04/04/2018 - 07:01 Permalink

All-Out Trade War: China Strikes Back With 25% Tariffs On $50BN Of US Imports

My response: Is this really a TRADE WAR or a reaction to normalization of trade to a more sustainable level? Because of the last 4 POTUS office holders, America's trade is out of control. In 2017, America's trade deficit with China was 375 billion dollars. THIS IS NOT SUSTAINABLE!!!!! We have run out of road for can kicking and President TRUMP knows it. Thank GOD for ENERGY EXPORTS or AMERICA would be in a WORLD OF HURT!!! We would NOT have GDP growth rate of 3%, but it would be closer to 0%.

Getting this entire TRADE DEFICIT debacle corrected is going to HURT short term, but will be much better in the long run. It is truly sad the CLINTON, BUSH and "OBOZO" hated America so much as to place America in such a state of chaos. I suspect OIL is going higher because that is the only way America can balance out the trade deficit numbers.

These previous POTUS office holders should be ashamed of allowing US debt to get to 20 Trillion and for allowing trade deficits to head toward 1 Trillion a year. The SHAME, the SHAME!!!!

In reply to by Haboob

Haboob junction Wed, 04/04/2018 - 06:25 Permalink

The US doesnt have a prisoner problem. It has a demographics problem. The Romans like modern imperial USA had slaves but at least they were honest about it. Plus are you aware prisoners are allowed to sell what they craft and even set their own prices? Nick knacks made in the finest craftsmanship you ever seen by prisoners who love what they do and all the time in the world to do it. 

In reply to by junction

Déjà view Haboob Wed, 04/04/2018 - 06:28 Permalink

$385Bn. Potential tariff advantage: U.S.

U.S. $480Bn. ANOTHER $350Bn. REMAINING...
Chicom: $170Bn. ANOTHER $50Bn. REMAINING...tariff indicator gauge approaching EMPTY!

Boeing tariffs...Chicom will return 25% tariff in form of Chicom Gov't airline subsidies...LOL!

U.S. goods and services trade with China totaled an estimated $648.5 billion in 2016.  Exports were $169.8 billion; imports were $478.8 billion.  The U.S. goods and services trade deficit with China was $385 billion in 2016.

https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republ

In reply to by Haboob

Oldwood Haboob Wed, 04/04/2018 - 07:43 Permalink

Exactly. Nothing has been done about this because no one wants the pain. Classic drug addiction, I'll quit tomorrow if I can only have my fix today, which evolves into rationalization as to why the drugs are NECESSARY and how everyone else is WRONG or at least at fault.

Now or never as the pain will only get substantially worse from here.

We could just wait until our currency and debt are worthless and all of our manufacturing industry is gone. No pain there, right?

In reply to by Haboob

halcyon Kamehameha Wed, 04/04/2018 - 06:10 Permalink

But, but, trade wars are easy to win.

Said a man with no grasp of history of trade wars or where they lead.

This will turn much uglier than it already has.

Neocons and war hawks are running the show in the swamp.

 

In reply to by Kamehameha

BigFatUglyBubble mantrid Wed, 04/04/2018 - 06:33 Permalink

IMO The President's Trade war is like putting aloe on advanced skin cancer.  Aloe is good for skin, but the problem is way too deep, complex, and severe to fix now.  The USA has no production foundation, skills, or infrastructure.  The positive effects could literally take decades to manifest.  blah blah end the fed blah....

In reply to by mantrid

Grimaldus halcyon Wed, 04/04/2018 - 06:48 Permalink

American gov funded itself for quite a long time by tariffs until progressive usurpers decided to ass-pillage citizens with income tax.

Tariffs are normal, income tax is not.

Grasp of history huh, yeah right.

Chinese belligerence is on display. They will not hesitate to kill millions, check their history.

 

 

 

 

 

 

 

 

 

 

Grimaldus

In reply to by halcyon

Haboob Grimaldus Wed, 04/04/2018 - 07:07 Permalink

Nice plan eh? Move manufacturing off shore to countries with billions of slaves. Get americans to spend a lot of money on junk(Consumerism) and then tax their incomes silly. Use this mega economy and income tax to produce a hidden military economy(MIC) War with your enemies, rinse and repeat until your dick falls off. 

In reply to by Grimaldus

Oldwood Grimaldus Wed, 04/04/2018 - 08:06 Permalink

Yes, it makes SO much more sense to tax our manufacturers, our employers, our income, our property, rather than to tax those entities which eliminate our businesses, our jobs and our income, especially when we can just set back collecting "entitlements" that only come at a cost to our businesses, our employers and our remaining few idiotic "workers" who still so ignorantly insist upon attempting to EARN a living.

America is just teaming with economic geniuses convinced that utopia is just around the corner fully sustained upon "something for nothing". After all.... it's our RIGHT!

In reply to by Grimaldus

Money_for_Nothing halcyon Wed, 04/04/2018 - 07:06 Permalink

China (and Japan, and Germany, and South Korea, and ...) was asked to trade fair and instead blew smoke up the asses of the naive. ZH has been saying this day was coming for years and people mocked. The day is here and mockers are saying they want to go back to slow rot of China. If you don't like Trump then go kiss Jimmy Carter's ass. A lot of Companies have just lost fortunes in China. The last word in trade war is war. What did Trump just get. Big increase in Military spending. Who needs a wall if you have soldiers, drones and helicopters on the boarder practicing war. Who has exposure to China and when do they get that margin call they dread?

In reply to by halcyon

random999 Wed, 04/04/2018 - 06:04 Permalink

china full out suicide mission.

Couldnt have wished for more.

Im just not sure why the PRC is doing it. Im sure Xi jin ping must know how this is gonna end. So why is he doing it?
Its finally time? No more kicking the can down the road now?

Oldwood Bobbyrib Wed, 04/04/2018 - 08:15 Permalink

Trump TAKES credit because NO ONE will GIVE him credit for ANYTHING except gun violence and the end of the world.

Nobody voted for Trump to see the stock market rise. It was predicted to FALL by all the experts, so why would we give a shit now?

There is a much needed "correction" at hand, and it's not about just the stock market. Rationality returning to our world will be painful if for no other reason that our current delusions were created to AVOID pain. Just another oxy addiction.

Cold turkey or methadone?

In reply to by Bobbyrib

Dancing Disraeli JDFX Wed, 04/04/2018 - 09:06 Permalink

We were ALREADY in a trade war.

This really is not difficult.

The USA became the world's largest economy, built on tariffs.

China's yuan pegging/tariffs have resulted in their rapid rise.

The US doesn't need to import food or fuel.  Let that sink in.

In reply to by JDFX