Published: Fri, May 10, 2019
Markets | By Otis Pena

China vows retaliation if Trump raises tariffs

China vows retaliation if Trump raises tariffs

Unless a deal is reached, the higher tariff will go into effect on Friday, which would likely see China respond with a retaliatory tariff of their own.

The view that Trump is relying on the strength of the US economy to outlast China in a trade war is shared by a range of banks and analysts and comes in large part from Trump's own public remarks.

Negotiations between the two economic giants entered a pivotal moment Thursday, as US officials, Mnuchin and Lighthizer, met with He to try to broker a deal - which has proved elusive for months.

The meeting comes on the heels of the president unexpectedly announcing plans to raise tariffs on $200 billion worth of Chinese goods - ranging from textiles to chemicals - from 10% to 25%.

In any case, China has threatened to retaliate if the USA moves forward with its tariff increase.

China says it "deeply regrets" the move and will have to take "necessary counter-measures".

Trump said Thursday that the Chinese wanted to come back to continue negotiations. "And we're getting closer to striking midnight". "We can't have that".

Politically, the possibility of allowing for slower GDP growth to fight a trade war with China represents a gamble for Trump, but the risk may not be as dramatic as it seems at first glance.

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The U.S. insists on keeping in place taxes imposed on 50 billion U.S. dollars' worth of Chinese goods to make sure China deliver on its promises.

But on Sunday Mr Trump said on Twitter that the USA would hike tariffs on $US200b worth of Chinese goods this week and could introduce fresh tariffs.

Gao described accusations about Chinese firms stealing tech secrets as unreasonable and said that they were not based on facts.

Trump has also referenced the economy in behind-the-scenes conversations with aides, pointing to its strength as evidence that they were wrong to condemn his trade policy from the start, according to a Republican official with knowledge of trade conversations.

The two countries have been ratcheting up tariffs in an ongoing trade war stretching back over a year, a conflict that has spilled over into seemingly unrelated matters like the detention of Huawei CFO Meng Wanzhou on charges of violating USA sanctions against Iran and ongoing allegations from U.S. intelligence that Huawei and other Chinese telecoms are being used to spy on unsuspecting customers on behalf of the government. "We can't have that", the president said, following a White House event on preventing surprise medical bills. The worries about trade this week have stifled what has been the hottest start to a year for USA stocks in decades. "I happen to think that tariffs for our country are very valuable", Trump said.

Image copyright Getty Images Image caption USA and Chinese officials have held several round of talks in an attempt to strike a deal to end the trade war.

But regulators are running out of U.S. goods for penalties owing to the lopsided trade balance. Or China could reverse the changes to the text and return the negotiations to where they were a week ago and work toward a deal to be signed at the G20 summit in Japan in June, the source said. American officials this week accused their Chinese counterparts of retreating from major planks of an agreement they had been working toward since early in the year that aims to resolve Washington's grievances of industrial theft, massive state intervention in markets and a yawning trade deficit.

Analysts say China will be reluctant to make many of these changes, which could undermine the Communist Party's political power.

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