China retaliates with tariffs after US begins trade war | World news | The Guardian

China retaliates with tariffs after US begins trade war | World news | The Guardian

State media accuses Trump administration of acting like a ‘bunch of hoodlums’ as tariffs on $34bn in Chinese goods go into effect

State media accuses Trump administration of acting like a ‘bunch of hoodlums’ as tariffs on $34bn in Chinese goods go into effect

A long-threatened trade war between the US and China has got under way after the world’s two largest economies imposed tariffs on each other. The US implemented tariffs on $34bn in Chinese goods, to which Beijing responded with levies on a similar quantity of US imports.

Minutes after the US tariffs went into effect at 12.01am on Friday US time, a spokesperson for China’s ministry of commerce said, “China promised not to fire the first shot, but in order to safeguard the country’s core interests as well as that of the people, it is forced to fight back,” according to Xinhua. The ministry stopped short of saying China had implemented its retaliatory duties.

Later on Friday, a spokesman for the ministry of foreign affairs said after the US tariffs kicked in, Chinese tariffs on US goods had immediately gone into effect.

Ahead of the tariffs, Chinese state media published a series of editorials criticising the US and emphasising the country’s readiness for a trade war. Chinese companies and investors girded for the worst, while economists cautioned any impact on the economy would be minimal.

“If what the US wants is to escalate a trade war with China, then so be it. A little fighting may be the only way the Trump administration clears its mind and allows everyone to sober up,” the state-run Global Times said on Friday.

“The Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China,” said an English-language article in the China Daily. On Thursday, a spokesperson for China’s ministry of commerce said the US will be “opening fire on the whole world and also opening fire on itself.”

China’s central banker said Trump’s promised tariffs of 25% on $50bn of Chinese goods – Friday’s $34bn to be followed by $16bn in a few weeks – would shave 0.2 percentage points off of China’s GDP and the “overall impact would be limited,” according to Xinhua.

Still, Chinese investors and companies were worried. The Shanghai Composite index was down 1.1%, after reaching more than a two-year low this week before rallying after the tariff deadline passed. Chinese manufacturers have already been hit by a strengthening yuan that has made exports more expensive.

Q&A

What is the China/US trade war about?

China and the US have officially launched a trade war. After months of threats and negotiations, the US implemented tariffs of 25% on $34bn in Chinese goods just after midnight on Friday. Within minutes, China’s ministry of commerce said Beijing was being “forced to fight back.” 

Earlier this week, Chinese officials promised to retaliate with tariffs on US imports, like soybeans, sorghum, autos, whiskey, and other products. The ministry did not say whether it had imposed those tariffs on Friday.

Within China, officials are making an effort to calm fears: policymakers promised the tariffs will have minimal impact, shaving 0.2 percentage points off of GDP. The ministry of commerce pledged to help affected Chinese companies.

Still, Chinese investors and businesses are nervous. Chinese exporters say they have already been hit by a strengthening yuan that has made their goods more expensive. The country’s main index, the Shanghai Composite Index, dipped to more than a two-year low this week. China’s high tech industries, part of the country’s Made in China 2025 initiative to upgrade manufacturing, will also be affected. The White House tariffs are aimed at curbing Chinese theft of US intellectual property in these industries. 

“In the short run, China will be affected badly… But the tariffs will bring double-lose results. China is never the only side to suffer,” said Cheng Dawei, a professor of international trade at Renmin University in Beijing.

“One of the biggest competitive advantages of Chinese exports is their low price. After tariffs are imposed, prices for Chinese made goods will rise and we’ll lose our comparative advantage,” said a representative for Sanhua Micro-Channel, which makes components for air conditioners in China’s eastern Zhejiang province.

The company said it had already moved some production to the US and Mexico and would likely move more. Others say they are turning their focus to Chinese consumers.

“China is a big market for us. If we can seize our own market, we will be less affected by the trade war,” said a spokesperson for Topsun, a furniture manufacturer in Zhejiang province.

Chinese tariffs on US agricultural products will also affect Chinese importers. Lu, who runs a shop at a fruit retail centre in central Beijing, said the prices of imported US fruit – subject to tariffs of as much as 50% – are certain to rise.

Still, he understands the US perspective. “Americans want to earn more money so they started a trade war. I can understand that. Who doesn’t want to earn more money?” he said.

Chinese media reported a container ship carrying 70,000 tons of US soybeans was racing to reach the port of Dalian on Friday before retaliatory tariffs were implemented. Some Chinese ports have stopped clearing US goods while waiting for official guidance, according to Reuters.

Trump has threatened to raise tariffs if China retaliates to roughly the value of total Chinese exports to the US last year of $506bn. He told reporters aboard Air Force One on Thursday, “You have another 16 (billion dollars) in two weeks, and then, as you know, we have $200bn in abeyance and then after the $200bn, we have $300bn in abeyance. Ok? So we have 50 plus 200 plus almost 300.”

Analysts say tariffs are not the most effective way of putting pressure on China, which the US accuses of unfair trade practices and stealing intellectual property from US companies.

Syracuse University economics professor Mary Lovely and researcher Yang Liang found 87% of electronics products to be levied by US tariffs came from multinationals and joint ventures rather than Chinese firms.

China’s economy is no longer as dependent on exports. Domestic consumption now accounts for more than half of the country’s GDP. Exports to the US account for only 19% of all of China’s exports.

“The reciprocal tariffs on US$50bn of goods in both directions will have minimal impact in China,” Andy Rothman, an investment strategist at Matthews Asia, wrote in a blog this week. China’s tariffs on major US exports like soybeans, sorghum, and autos, target Republican areas ahead of US midterm elections. “The impact on the US political environment is, however, likely to be far greater,” he said.

One area that will be hurt by US tariffs is China’s high tech industries, in things like new energy vehicles, robotics and other forms of smart manufacturing, that form the country’s “Made in China 2025” industrial plan.

Cheng Dawei, a professor of international trade at Renmin University in Beijing, says these industries are still in their early stages and need inputs from global supply chains.

“In the short run, China will be affected badly… But the tariffs will bring double-lose results. China is never the only side to suffer,” she said. “Imposing high tariffs definitely hurts China badly, but we will not be beaten down.”

Additional reporting by Wang Xueying

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