BEIJING/WASHINGTON—China hit back quickly against the Trump administration’s plans to impose tariffs on $50 billion in Chinese goods, announcing on April 4 that it will retaliate with a list of similar duties on key U.S. imports including soybeans, planes, cars, beef and chemicals.
The speed with which the trade struggle between Washington and Beijing is ratcheting up—China took less than 11 hours to respond with its own measures—led to a sharp selloff in global stock markets and commodities.
U.S. President Donald Trump, who has long charged that his predecessors served the United States badly in trade matters, rejected the notion that the tit-for-tat moves amounted to a trade war between the world’s two economic superpowers.
“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.,” Trump wrote in a post on Twitter early on Wednesday.
Because the actions will not be carried out immediately, there may be room for maneuver. Publication of Washington’s list starts a period of public comment and consultation expected to last around two months. The effective date of China‘s moves depends on when the U.S. action takes effect.
U.S. Commerce Secretary Wilbur Ross said in an interview with CNBC that it would not be surprising if the U.S. and China trade actions led to negotiations, although he would not speculate on when this might happen.
Investors were wondering, nonetheless, how far one of the worst trade disputes in many years could escalate.
“The assumption was China would not respond too aggressively and avoid escalating tensions. China‘s response is a surprise for some people,” said Julian Evans-Pritchard, senior China economist at Capital Economics, noting that neither side had yet called for enforcement of the tariffs.
“It’s more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force,” said Evans-Pritchard.
U.S.-made goods that appear to face added tariffs in China, based on an analysis of Beijing’s list, include Tesla Inc. electric cars, Ford Motor Co.’s Lincoln auto models, Gulfstream jets made by General Dynamics Corp. and Brown-Forman Corp.’s Jack Daniel’s whiskey.
Unlike Washington’s list, which was filled with many obscure industrial items, China‘s list strikes at signature U.S. exports, including soybeans, frozen beef, cotton, and other key agricultural commodities produced in states from Iowa to Texas that voted for Trump in the 2016 presidential election.
“China is also trying to weaken our will by targeting certain segments of our economy,” White House trade adviser Peter Navarro said in an interview with National Public Radio.
“But let’s remember: we buy five times more goods than they buy from us. They have a lot more to lose in any escalation in this matter,” he added.
While Washington targeted products that benefit from Chinese industrial policy, including the regime’s “Made in China 2025″ initiative to replace advanced technology imports with domestic products in strategic industries such as advanced IT and robotics, Beijing’s appears aimed at inflicting political damage.
Tobacco and whiskey, for example, are both on Beijing’s list and are produced in states including Kentucky, home of Senate Majority Leader Mitch McConnell.
Beijing’s list of 25 percent additional tariffs on U.S. goods covers 106 items with a trade value matching the $50 billion targeted on Washington’s list, China‘s commerce and finance ministries said.
“This is a real game changer and moves the trade dispute away from symbolism to measures which would really hurt U.S agricultural exports,” said Commerzbank commodities analyst Carsten Fritsch.
China‘s tariff list covers aircraft that would likely include older models such as Boeing Co.’s workhorse 737 narrowbody jet, but not newer models like the 737 MAX or its larger planes.
A Beijing-based spokesman for Boeing, the largest single U.S. exporter to China, declined to comment.
Beijing’s announcement triggered heavy selling in global financial markets, with U.S. stock futures sliding 1.5 percent and U.S. soybean futures plunging nearly 5 percent and on track for their biggest fall since July 2016. The dollar briefly extended early losses, while China‘s yuan skidded in offshore trade.
Hours earlier, the U.S. government unveiled a detailed breakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25 percent duties, ranging from light-emitting diodes to machine parts.
The U.S. move is aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfer from U.S. companies to Chinese competitors, charges Chinese officials deny.
The tariff list from the office of U.S. Trade Representative (USTR) Robert Lighthizer followed China‘s imposition of tariffs on $3 billion worth of U.S. fruits, nuts, pork and wine to protest tariffs on Chinese steel and aluminum imposed last month by Trump.
Least Impact on US Consumers
Many consumer electronics products designed in the United States but assembled in China—such as cellphones made by Apple Inc. and laptops made by Dell—were excluded from the U.S. list, 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 U.S.
The USTR office developed the tariff targets using a computer algorithm designed to choose products that would inflict maximum pain on Chinese exporters but limit damage to U.S. consumers.
USTR has scheduled a May 15 public hearing on the tariffs, which were announced as the result of an investigation under Section 301 of the 1974 U.S. Trade Act.
WATCH: Death by China – How America Lost its Manufacturing Base
*Note from the director Prof. Peter Navarro: As you watch this film, it is important to always distinguish clearly between the good and hard-working people of China, and their repressive Communist government now victimising both American and Chinese citizens alike.