Trade war heats up

China fires back in trade war

Duties ranging from 5% to 25% will be levied on 5,207 kinds of American imports if the U.S. delivers its proposed taxes on another $200 billion of Chinese goods.

by Bloomberg News

China announced a list of $60 billion worth of U.S. imports it plans to apply tariffs on should the Trump administration follow through with its latest trade threats.

Duties ranging from 5% to 25% will be levied on 5,207 kinds of American imports if the U.S. delivers its proposed taxes on another $200 billion of Chinese goods, the Ministry of Finance said in a statement on its website late Friday.

Beijing plans to impose an additional 5% in tariffs on about 600 kinds of products including planes and computers, another 10% on almost 1,000 products including wigs and textiles, an extra 20% on more than 1,000 items including some chemicals, cookers and paper, and an additional 25% on over 2,400 products such as meat, wheat, wine and LNG, according to the statement.

"China’s differential tax rate countermeasures are rational and restrained," the Ministry of Commerce said in a separate statement on its website. "The implementation date will be subject to the actions of the U.S., and China reserves the right to continue introducing other countermeasures."

The retaliation stands to further inflame tensions between the world’s two biggest economies and echoes China’s response to the previous round of tariffs, which took effect last month.

Tit-for-Tat

President Donald Trump this week ordered officials to consider imposing a 25 percent tax on $200 billion worth of imported Chinese goods, up from an initial 10% rate. The move was intended to bring China back to the negotiating table for talks over U.S. demands for structural changes to the Chinese economy and a cut in the bilateral trade deficit. Today’s retaliation from China suggests that tactic hasn’t worked.

The Trump administration slapped duties on $34 billion of Chinese goods last month, a move that also prompted immediate retaliation from China. Another $16 billion in levies will likely follow in the coming days or weeks. 

The U.S. tariffs now in place or threatened add up to almost half of the value of goods it imported from China last year. The Chinese side seem to be seeking to match that ratio with the new proposals.

Chinese authorities -- bracing for economic fallout -- have taken a range of measures in recent weeks to bolster the economy. On Friday officials also stepped into cushion the yuan, which has been battered by trade tensions and was approaching the key level of seven to the dollar. 

The People’s Bank of China will impose a reserve requirement of 20% on some trading of foreign-exchange forward contracts, according to a statement on Friday evening. That will effectively make it more expensive to short the yuan, and is a tactic that the central bank used to stabilize the currency in the aftermath of its shock devaluation in 2015. 

China is trying to seek an “equal” position in future talks with the U.S. with today’s retaliation announcement, said Gai Xinzhe, analyst at the Bank of China’s Institute of International Finance in Beijing. “Any talks in the future, should they happen, should be conducted on an equal and faithful basis.”

--With assistance from Xiaoqing Pi, Yinan Zhao and Kevin Hamlin.

To contact Bloomberg News staff for this story: Miao Han in Beijing at mhan22@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net ;Jeffrey Black at jblack25@bloomberg.net

© 2018 Bloomberg L.P 

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