China hits back with new tariffs
By Wang Cong Source:Global Times Published: 2019/8/23 23:08:40 Last Updated: 2019/8/24 0:47:10
Levies on $75b in US products; auto import taxes resumed
China on Friday struck back at the US with additional tariffs on hundreds of billions of dollars in US products in a tit-for-tat response to planned US tariffs on Chinese products, and slammed the US for further escalating trade tensions and hurting the interests of both countries as well as the world.
The additional tariffs on $75 billion in goods are carefully designed to inflict the maximum pain on the US economy, which is already under serious recessionary pressure, and the US stock market, while minimizing the impact on the Chinese economy, analysts noted.
In several statements Friday night, the Customs Tariff Commission of the State Council, China's cabinet, announced that it would impose additional tariffs of 10 percent and 5 percent on 5,078 US products, from agricultural products to chemicals and medicine, worth $75 billion in two phases. The first batch of tariffs will take effect on September 1 and the second on December 15.
The timetable of the Chinese tariffs is in line with planned US tariffs of 10 percent on Chinese products worth $300 billion, which was initially meant to take effect on September 1, but the US had delayed part of the tariffs to December 15.
In a statement, the Customs Tariff Commission said that it was a "forced" countermeasure to US bullying. "China's tariff measures are a forced move to counter US unilateralism and trade protectionism," it said.
In another move, China said it will resume an additional 25 percent in tariffs on vehicles and auto parts from the US starting December 15. The tariffs were put on hold in December 2018 after the two sides reached a truce at a leaders' summit in Argentina.
While the US goods targeted by the Chinese tariffs are in much smaller amounts compared to Chinese products targeted by US tariffs, they are well crafted to exert maximum pain on the US economy and, specifically, the financial market, analysts said.
"This will deal another major blow to the US economy, which is facing recession risks,"Cheng Dawei, a professor of economics at the Renmin University of China, told the Global Times, "and more importantly, they will put increased pressure on the US administration."
The US administration is already under serious domestic fire, as warnings point to a looming recession for the US economy, which many blamed on the administration's trade policies.
The tariffs, which were announced shortly before the US stock markets opened on Friday, were also meant to hit the US stock market, said Mei Xinyu, a research fellow at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.
"This really shows China's art of fighting. By announcing the tariffs after domestic markets closed and right before the US market opened, it will hit the US where it hurts, while avoiding an impact on itself," Mei said.
Following news of Chinese tariffs, US stocks opened lower on Friday, with the NASDAQ dropping 0.58 percent, the Dow Jones Industrial Average losing 0.46 percent and the S&P falling 0.45 percent.
In another apparent bid to ease collateral damage on the Chinese economy, the State Council said companies could apply for products to be exempted from the list. "The Chinese side wants to stress once again that for China and the US, cooperation is the only right path and win-win is the only way to a better future," it said.
The latest back-and-forth between the world's two economic powers also left unknown whether trade talks planned for September in Washington will proceed, and seriously dimmed the prospect for any meaningful progress.
"I think the talks will continue because both sides need a deal. However, that does not mean they will not fight at the same time. This is all part of negotiations," Cheng said.
Shortly after the Chinese tariffs were announced, US President Donald Trump tweeted, "Now the Fed can show their stuff!" It was unclear what Trump meant but he had been pushing the US Federal Reserve to cut interest rates to boost growth amid pressure.
Trump was met with pushback from the Fed Chair Jerome Powell, who said the Fed could provide stimulus when necessary, but warned that trade disputes present a "new challenge."
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