China vows retaliation for US tariff threat

This week, Trump threatened to impose an additional $200 billion worth of tariffs on Chinese-made products.

USA financial analysts said Trump appeared to believe there was a political benefit to waging a trade war, although that could change quickly amid economic fallout.

The US Trade Representative's office announced a $200 billion list on Wednesday of Chinese goods for possible 10 percent tariffs including fish, apples and burglar alarms.

The Wall Street Journal, citing unnamed Chinese officials, said Beijing was considering holding up licenses for USA companies, delaying approvals of mergers involving US firms and stepping up border inspections of American goods.

FILE - Imported nuts from the United States are displayed at a supermarket in Beijing, March 23, 2018.

Farmer Terry Davidson walks through his soy fields July 6, 2018, in Harvard, Illinois, the same day China imposed retaliatory tariffs aimed at the United States soybean market. Each side is mulling tariffs on a further $16 billion in goods that would bring the totals to $50 billion. The tariffs announced Tuesday would be the third wave.

The new list-targeted at China's key manufacturing export industries-contains over 6,000 products, including fruits, vegetables, live eels, feathers and beaver heads as well as hi-tech minerals that the USA needs.

Whether the trade war continues will depend on the political reaction to the current tariffs, says Gary Hufbauer, senior nonresident fellow at the Peterson Institute.

"Judging from (China's) economic fundamentals and corporate earnings expectations, which are under pressure amid the trade war with the United States, the stock market is yet to reach a bottom", said Yan Kaiwen, an analyst with China Fortune Securities. "As the trade tensions escalate and the data shows more signs of weakness, there will be more policy support and we should see some stabilization". The proposed list of goods includes consumer items such as clothing, television components and refrigerators as well as other high-tech items, but it omitted some high-profile products like mobile phones.

One problem for Beijing is that it imports far less from the USA than it exports - much to the annoyance of Donald Trump - and that gives it less scope to retaliate - they may run out of American goods to penalise. "Tariffs threaten to boomerang on the very workers they're supposed to help, and will only further undermine the confidence manufacturers need to make investments in new equipment, facilities and people".

Head of U.S. equity strategy at JP Morgan, Dubravko Lakos-Bujas, said: "Despite trade headlines, S&P 500 companies should deliver robust earnings on above-trend revenue growth and sharply higher margins".

Tuesday's announcement was met with backlash from some quarters.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, responded to Lighthizer's announcement with dismay.

China 'cannot match fresh US tariffs, ' Vishnu Varathan of Mizuho Bank said.

President Donald Trump has threatened to tax as much as $US550 billion in Chinese products - an amount that exceeds America's total imports from China a year ago. In particular, if they hit American liquefied natural gas with tariffs, the Chinese could undercut investor plans to build a more robust and long-term domestic infrastructure.

President Donald Trump has threatened higher tariffs on more than $500 billion of goods, or almost all of China's annual exports to the United States.

  • Zachary Reyes