Published: Tue, June 19, 2018
Markets | By Otis Pena

Trump doubles down on trade war with China by announcing new tariffs

"In terms of tariff imposition, China will run out of ammunition faster, since it imported only $130 billion of goods from the USA in 2017", Kuijs wrote Tuesday.

The United States and China have the world's biggest trading relationship but official ties are increasingly strained over complaints Beijing's industry development tactics violate its free-trade pledges and hurt American companies.

The escalating conflict between the world's two largest economies has rattled markets and companies, which fear disruption to their global supply chains.

A Commerce Ministry statement criticized the USA measures as "extreme pressure and blackmail".

"This latest action by China clearly indicates its determination to keep the United States at a permanent and unfair disadvantage, which is reflected in our massive $376 billion trade imbalance in goods", said the USA president. "China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology", Trump said. The administration has identified $200 billion in Chinese exports it plans to add tariffs to, on top of the original $50 billion in products it first made a decision to go after.

But investors in US agricultural commodities appeared to be far more anxious.

"Trade between our nations, however, has been very unfair, for a very long time".

Neither side has yet imposed tariffs on the other in their growing dispute over technology and the USA trade gap; the first round is to take effect on July 6.

U.S. Trade Representative Robert Lighthizer, who spearheaded the investigation leading to Trump's initial tariff threat, put out a statement saying he supports the president's latest move.

North Korean leader Kim Jong Un visiting China: Chinese state media
North Korea has always reacted to the Ulchi exercises with belligerence and often its own demonstrations of military capability. The athletes from the Koreas will march under a neutral Korean peninsula flag and under the "Korea" name, the statement said.

But Louis Kuijs, head of Asia economic at Oxford Economics, said Beijing could increase the tariff levy to make up for the smaller raw amount of goods.

China's Commerce Ministry criticised the White House action as blackmail and said Beijing was ready to retaliate.

President Donald Trump threatened late Monday in the United States to impose tariffs on an additional $200 billion worth of Chinese goods if Beijing goes through with its promise to retaliate against the USA tariffs announced on Friday.

"China can make compromises by boosting imports from the USA, lowering market entry restrictions for U.S. businesses ... but it's hard for China to make compromises at the structural level such as significantly reducing the role the state plays in economic activities", he said.

A paper published by Canadian think tank the CD Howe Institute suggests that Mr Trump's threats are having an effect on United States manufacturing by using "uncertainty as a new weapon in trade protection". The yield on the 10-year Treasury note fell to 2.89 percent from 2.92 percent.

Shares of Chinese companies listed in the USA also slumped. The White House is finalizing a list of $16 billion in additional goods it will sanction later. China buys around $1 billion worth of American sorghum each year.

The tariffs were quickly matched by China on U.S. exports, including lobsters and soybeans, a move that drew the president's ire.

Trade-sensitive companies like Boeing Co. and Caterpillar Inc., China-exposed stocks like Acacia Communications Inc. and NXP Semiconductors, and steel producers and metals companies like Alcoa Corp. and United States Steel Corp. are among the hardest hit in NY trading, while the Dow Jones Transportation Average is down 1.9 per cent, the most since May 3.

While the Trump administration has insisted that the enforcement action vs. ZTE was separate from talk talks, it's clear that Chinese President Xi Jinping didn't agree.

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