Frustrated Over China Trade War Progress, Trump Considers Escalation

Friday, 03 Aug, 2018

Aerial view of containers at a loading terminal in the port of Hamburg, Germany August 1, 2018.

US Trade Representative Robert Lighthizer said: "The increase in the possible rate of the additional duty is meant to provide the administration with additional options to encourage China to change its harmful policies and behaviour and adopt policies that will lead to fairer markets and prosperity for all of our citizens".

The latest action against China also comes closely behind the August interest rate decision from the Federal Reserve, which saw the U.S. central bank leave its monetary policy unchanged but reiterate an otherwise bullish outlook for the U.S. economy.

In Beijing, a foreign ministry spokesman, Geng Shuang, said Beijing was open to dialogue but gave no indication about the status of possible negotiations. This trend should surprise absolutely no one since slapping tariffs on individual countries will only serve to shift the source of America's imports to countries unaffected by tariffs, while the Chinese government has more than enough tools at its disposal to counteract new tariffs with additional subsidies.

Mr. Trump has threatened to slap tariffs on virtually all of China's exports to the U.S.

Have these tariffs impacted American businesses at all?

Wang Yi, the Chinese government's top diplomat, said US efforts to pressure China would be in vain, urging its trade policymakers to "calm down". "Regrettably, instead of changing its harmful behaviour, China has illegally retaliated against us workers, farmers, ranchers and businesses", Mr. Lighthizer said.

In July, the Trump administration introduced 25-percent tariffs on Chinese goods worth $34 billion.

While the tariffs would not be imposed until after a period of public comment ends on September 5, a senior administration official said that Trump "remains open to conversations", and that the administration is "in contact with our Chinese counterparts".

They include food products, chemicals, steel and aluminum and consumer goods ranging from dog food, furniture and carpets to auto tires, bicycles, baseball gloves and beauty products. "We hope that the trade policy makers in the United States will be cool-headed and listen to the voice of USA consumers and pay high attention to the voice of the American business community." he said, noting that higher tariffs will add to costs for USA companies operating in China and for consumers.

A spokeswoman for the U.S. Trade Representative's Office declined to comment on the proposed tariff rate increase or on whether changing them would alter the deadlines laid out for comment period before implementation.

"We urge the United States to correct its attitude and not to try to blackmail China because it will never work", said Geng at a news conference. Officials in Beijing have vowed to respond with the same amount of tariffs on US products.

Chinese equities and the yuan extended losses Wednesday afternoon, gaining downward momentum as concern over possible higher USA tariffs overwhelmed optimism about Beijing's pledge to support economic growth.

Lighthizer told reporters on Wednesday that the additional tariffs are necessary because the original duties did not prompt China to change its trade policy. "But we also believe that this United States dollars support could be derailed if either one or more of the above variables falls out from the equation", says Saktiandi Supaat, an FX strategist at Maybank in Singapore.

The move signalled displeasure among Mr Trump's own party over his protectionist actions, but chances of it becoming law were slim as Congress would likely need to override a presidential veto by Mr Trump.