US Hikes Tariffs On Chinese Goods, China Says Will Strike Back

Saturday, 11 May, 2019

Earlier, the USA raised tariffs from 10 percent to 25 percent on $200 billion worth of Chinese goods ahead of a second day of trade talks between top Chinese trade negotiator Liu He and U.S. officials in Washington.

The Trump administration raised the import taxes on those goods from 10 per cent to 25 per cent. The tariff increase took effect even after negotiators for the two sides resumed talks Thursday in Washington.

"It is hoped that the U.S. and the Chinese sides will work together.to resolve existing problems through co-operation and consultation", it said in a statement.

China responded to earlier USA tariff hikes by imposing penalties on $110 billion of American imports but is running out of goods for retaliation due to their lopsided trade balance.

Friday's second day of talks between Liu, US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer wrapped up before lunchtime, lasting about 90 minutes. Only when those shipments complete the three- to four-week voyage across the Pacific to the US would they face the 25 per cent tariff.

"The negotiators ended the first day of talks aimed at saving a trade deal even as Trump said he would proceed with "very heavy tariffs" on Chinese products".

"We come here this time, under pressure, which shows China's greatest sincerity, and want to sincerely, confidently, and rationally resolve certain disagreements or differences facing China and the United States".

Trade negotiators from the United States and China began meeting at 5 PM ET in an attempt to strike a deal, but analysts have not been optimistic about the chances of a quick conclusion.

Trump went on to tweet that trade talks with China are proceeding in a "congenial manner" and "there is absolutely no need to rush" to finalize a trade agreement.

China responded to Trump's tariffs past year with levies on a range of goods including soybeans and pork. This has led to a total cost to USA consumers of 1.5 billion US dollars a year.

'I think the Trump administration is quite serious about imposing tariffs, ' Kennedy said.

Trump's bluster risks painting the Chinese side into a corner and forcing them to walk away from a deal rather than appearing to be bullied by the U.S. Due to its history, Chinese are particularly sensitive about appearing to be forced into unequal deals with foreign powers.

Analysts say the tariff hikes could hit growth in both economies and drag down global growth.

Hence, there's still a chance for a deal to be struck but I wouldn't expect it to be a lasting truce between the two countries.

American companies disagree with tariff hikes but "are supportive of the idea in the short term if it helps us get to a strong, enforceable, long-term agreement that addresses structural issues", said Greg Gilligan, the deputy chairman of the American Chamber of Commerce in China. Trump, speaking at an event in Washington, also said he may hold a phone call with his Chinese counterpart, Xi.

In comments to Chinese state media upon arriving in Washington, Liu said that hiking tariffs "is very disadvantageous to both parties". Officials did not speak to reporters as they left the talks. But second - and potentially under-appreciated - is the degree of exposure many U.S. tech companies have to Chinese markets. The Shanghai Composite Index rose 3.1% and Hong Kong's Hang Seng Index closed up 0.8%.

The biggest Chinese import sector affected by the rate hike is a $20 billion-plus category of internet modems, routers and other data transmission devices, plus about $12 billion worth of printed circuit boards used in a huge range of US-made products.