China vows retaliation for $200 billion U.S. tariff threat

Soybean prices have fallen dramatically in recent weeks.
Daniel Acker  Bloomberg

Soybean prices have fallen dramatically in recent weeks. Daniel Acker Bloomberg

His determination to renegotiate trade deals has targeted not only competitors on the world market such as China, but longtime friends and allies such as the European Union or Canada.

Calling Washington's behavior irrational, Beijing warned that the United States is, in the first instance, hurting itself with protectionist measures and constant attacks on free trade.

China's compliance with WTO guidelines lies at the heart of the conflict, notably over Beijing's alleged state support for purportedly private companies.

"China has no option but to fight fire with fire".

"This is an appropriate response under the authority of Section 301 to obtain the elimination of China's harmful industrial policies", Robert Lighthizer, the USA trade representative (USTR), said.

"Unfortunately, China has not changed its behavior - behavior that puts the future of the USA economy at risk", he continues.

"China's failure to fully embrace the open, market-oriented policies on which this institution is founded must be addressed, either within the WTO or outside the WTO", Shea said according to prepared remarks released by the United States mission. "There is no justification for such action". High-level talks between the two countries starting in May failed to deliver a breakthrough to head off a trade war.

The previous round of tariffs: The Trump administration last week imposed 25 percent tariffs on $34 million in Chinese goods, prompting Beijing to impose retaliatory tariffs of the same amount on USA imports.

Senate Finance Committee Chairman Orrin Hatch said the announcement "appears reckless and is not a targeted approach".

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The National Association of Manufacturers also criticized the US decision, saying this latest round of tariffs could undermine the economic gains from the administration's tax and regulatory reform policies.

"Tariffs are taxes, plain and simple".

"None of this has produced a dramatic change in other countries and has yielded further retaliation", Mr. Holleyman wrote in an e-mail.

Soybeans, crushed to make cooking oil and the protein-rich animal feed ingredient soymeal, were the biggest US agriculture export to China a year ago at a value of US$12.3 billion, according to the US Department of Agriculture.

The Retail Industry Leaders Association (RILA) was quick to condemn the proposal, saying it will punish American consumers. The prospect of an worldwide trade war has sent jitters through world markets.

Louis Kuijs, Hong Kong-based Head of Asia Economics at Oxford Economics, said while he expects China to strongly condemn the U.S. moves, its policy response is likely to be limited for now.

Several traders said they saw some dollar selling by large state banks in the spot market, which went some way to supporting the yuan, though they did not know whether USA dollar liquidity offered by the banks was on behalf of the central bank or corporate clients.

The latest move suggests that Trump - who in March declared that "trade wars are good and easy to win" - may be compromising on his pledge to spare consumers from the pain. "It will also result in retaliatory tariffs, further hurting American workers", a Chamber spokeswoman said.

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