China announced that it will increase tariffs imposed on about $60 billion of U.S. goods in retaliation for President Donald Trump’s latest escalation of the trade war.
The tariffs will take effect on June 1, according to a statement on the Ministry of Finance’s website on Monday. The charges will thereby be raised on most of the goods listed on a previous retaliation list effective last September.
The yearlong trade frictions between the world’s two biggest economies worsened last week when the Trump administration announced an extra 25% tariff on thousands of Chinese products worth about $200 billion. The U.S. is set to release a plan to levy a 25% additional tariff on all remaining imports from China later on Monday.
China’s retaliatory tariffs will be imposed at the following levels:
- 25% tariffs on 2,493 items from current 10%
- 20% tariffs on 1,078 items from current 10%
- 10% tariffs on 974 items from current 5%
- 5% tariffs to continue on 595 items. Auto parts, which were initially on the list but have been exempted since December, are still excluded.
The Ministry also said in another statement that importers and associations can apply for exemptions for goods on the tariff lists. Once approved, the goods will be excluded and won’t be subject to the punitive tariffs for one year. Companies can also get a rebate of already paid tariffs.
"China’s tariff move is in response to the U.S. unilateralism and trade protectionism," the ministry said in a separate statement on Monday. "China hopes that the U.S. will return to the right track of bilateral trade talks, work together with China and meet each other halfway, to reach a win-win and mutually beneficial agreement on the basis of mutual respect."
Deadlock
The United States and China appeared at a deadlock over trade negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any “bitter fruit” that harmed its interests.
The trade war between the world’s top two economies escalated on Friday, with the United States hiking tariffs on $200 billion worth of Chinese goods after President Donald Trump said Beijing "broke the deal" by reneging on earlier commitments made during months of negotiations.
White House economic adviser Larry Kudlow told the "Fox News Sunday" program that China needs to agree to "very Strong" enforcement provisions for an eventual deal and said the sticking point was Beijing’s reluctance to put into law changes that had been agreed upon. Kudlow said the U.S. tariffs would remain in place while negotiations continue.
Beijing remained defiant.
"At no time will China forfeit the country’s respect, and no one should expect China to swallow bitter fruit that harms its core interests," the People’s Daily, a newspaper controlled by the Chinese ruling Communist Party, said in a commentary on Monday.
It said Beijing was open to talks but would not yield on important issues of principle.
China’s nationalist Global Times tabloid said in an editorial on Monday that the country had no reasons to fear a trade war.
"The perception that China cannot bear it is a fantasy and misjudgment," the commentary said.
"If they weren’t being seriously provoked, the Chinese people would not favor any trade war. However, once the country is strategically coerced, nothing is unbearable for China in order to safeguard its sovereignty and dignity as well as the long-term development rights of the Chinese people."
On Sunday, Trump sought to portray the United States as being in an advantageous position.
"We are right where we want to be with China," Trump wrote on Twitter, saying U.S. purchasers of Chinese goods could either buy them from domestic manufacturers or from other nations.
Trump also repeated an erroneous statement that the United States would be taking in "Tens of Billions of Dollars in Tariffs from China."
The tariffs are not paid by the Chinese government or by firms located in China. They are paid by importers of Chinese goods, usually American companies or the U.S.-registered units of foreign companies. These often pass on the costs to customers, mostly manufacturers and consumers in the United States.
Kudlow, when asked who was paying, said "both sides will suffer on this," contradicting Trump, although he added that the U.S. economy should be able to cope.
"We’re in terrific shape in order to correct 20 years plus of unfair trading practices with China," Kudlow said. "... This is a risk we should and can take without damaging our economy in any appreciable way".
G20 Summit
Kudlow said there is a "strong possibility" that Trump will meet Chinese President Xi Jinping at a G20 summit in Japan in late June.
Until last week, there were expectations Trump and Xi would sign a trade deal at the summit. However, the trade talks suffered a major setback last week when China proposed extensive revisions to a draft agreement. Beijing wanted to delete prior commitments that Chinese laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers.
Vice Premier Liu He, China’s top economic adviser, sought to defend the changes in talks with senior U.S. officials in Washington on Thursday and Friday, arguing that China could accomplish the policy changes through decrees issued by its State Council, or cabinet, sources familiar with the talks said.
U.S. Trade Representative Robert Lighthizer rejected that, telling Liu that the United States was insisting on restoration of the previous text.
“We would like to see these corrections in an agreement which is codified by law in China, not just a State Council announcement. We need to see something much clearer. And until we do we have to keep our tariffs on,” Kudlow said.
China strongly opposes the latest U.S. tariff hike, and must respond to that, Liu told reporters on Saturday.
Kudlow said on Sunday he expected retaliatory tariffs to kick in but that it had not yet happened.
Trump has ordered Lighthizer to begin imposing tariffs on all remaining imports from China, a move that would affect about an additional $300 billion worth of goods.
Lighthizer said a final decision on that has not yet been made but it would come on top of the Friday tariff rate increase to 25% from 10% on $200 billion worth of Chinese imports.
U.S. farmers, a key constituency of Trump, have been among the hardest hit in the trade war, with soybean shipments to China dropping to a 16-year low in 2018.
(Published by Bloomberg and Reuters, May 13, 2019)
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