Shipping containers sit stacked among gantry cranes at the Busan Port Terminal at dusk in Busan, South Korea. (Photographer: SeongJoon Cho/Bloomberg)  

China Strikes $60 Billion of U.S. Goods in Growing Trade War

(Bloomberg) -- China announced it will take retaliatory tariff action against $60 billion of U.S. goods, sharply escalating their trade conflict as the Trump administration considers imposing duties on almost all Chinese imports.

China’s retaliatory tariffs, on items ranging from meat to wheat and textiles, will take effect on Sept. 24, China’s Ministry of Finance said in a statement posted on its website. Beijing is still ready to negotiate an end to the trade tensions with the U.S., the ministry said.

At almost the same time Beijing released its list of counter-tariff targets, President Donald Trump on Tuesday threatened more punitive measures against China if it targets politically potent U.S. agricultural products for retaliation.

“China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me,” Trump said on Twitter. “What China does not understand is that these people are great patriots.”

CHINA REACT: Trade War Will Be Long Haul, Growth Drag Larger

In an announcement on Monday, Trump ordered his administration to levy 10 percent tariffs on about $200 billion in Chinese goods on Sept. 24 and to increase the rate in January to 25 percent if Beijing refuses to offer trade concessions. The latest round of duties comes on top of a 25 percent tariff already imposed on about $50 billion in Chinese goods, which triggered retaliation from Beijing on the same amount of U.S. imports.

Beijing’s plans for tariffs on $60 billion of U.S. goods includes an additional 5 percent duty on about 1,600 kinds of U.S. products including smaller aircraft, computers and textiles and an extra 10 percent on more than 3,500 items including chemicals, meat, wheat, wine and LNG. In a previous announcement from August, those products had faced extra tariffs of up to 25 percent.

Stocks shrugged off the latest ratcheting up of trade tensions, with the S&P 500 Index, Dow Jones Industrial Average, and Nasdaq Composite Index all higher as of 10:45 a.m. in New York. The calm reaction has some investors saying the markets had already priced in 10 percent tariffs and that it could’ve been worse.

Trump on Monday said that the U.S. will immediately pursue additional tariffs on about $267 billion of Chinese imports if Beijing strikes back against American farmers and industry. The third batch of tariffs, together with the previous rounds, would more than cover all products the U.S. imports from China, which were worth about $505 billion last year.

The president and his fellow Republicans face some political peril if Trump’s trade battles have negative repercussions for some of their core supporters in farming and industrial states, with less than 50 days before the congressional midterm elections.

China Strikes $60 Billion of U.S. Goods in Growing Trade War

The Trump administration’s duties on $200 billion spared smartwatches and Bluetooth devices, bicycle helmets, high chairs, children’s car seats and playpens. They were among 300 tariffs lines that were removed from a preliminary list of targets for U.S. duties.

The Trump administration tailored its final list of Chinese targets to help ensure American consumers don’t feel the pinch, Commerce Secretary Wilbur Ross said Tuesday.

“We were trying to do things that were least intrusive on the consumer," Ross said on CNBC. “We really went item-by-item trying to figure out what would accomplish the punitive purpose on China and yet with the least disruption in the U.S."

What Our Economist Says

“Mounting U.S. pressure on China is unlikely to result in concessions from Beijing. The further blows on trade come at a time when the Chinese economy is already slowing. A prolonged trade war could deepen the drag on growth -- with larger implications for Asia’s supply chains.”

Chang Shu, Bloomberg Economics

Trump is ratcheting up pressure on Beijing in order to motivate it to change its trade practices. Business leaders are warning the high-stakes strategy could upend their supply chains and raise costs, as economists worry Trump’s tactics could derail the broadest global upswing in years.

Trump’s tariff campaign is also dividing his advisers between China hawks like U.S. Trade Representative Robert Lighthizer, who are determined to force sweeping changes to China’s industrial policies, and Treasury Secretary Steven Mnuchin, a former Wall Street banker who is seeking a trade deal.

China will reject new trade talks if Trump moves ahead with the $200 billion round of duties, throwing into doubt the prospect of a diplomatic breakthrough, two people familiar with the matter said this week. The administration earlier this month floated the idea of talks led by Mnuchin, with Chinese Vice Premier Liu He expected to lead the Beijing delegation.

©2018 Bloomberg L.P.