Markets fall after Beijing accuses Washington of 'blackmail'

Virginia Carson
June 20, 2018

President Trump urges yet another round of China tariffs, amid the escalating trade war with Beijing. China, claiming the United States had "launched a trade war", retaliated nearly immediately, outlining its own tariffs on U.S. goods worth $50 billion.

Later on Friday, China announced its own tariffs on American goods, including a wide range of seafood and agricultural products, many cars and trucks, petrochemicals and an array of medical equipment.

Trump said that the new tariff would go into effect if the Chinese government did not lower recently announced tariffs on USA goods and failed to address the theft of USA intellectual property by Chinese companies.

In response, China announced tariffs on $34bn of U.S. goods including agricultural products, cars and marine products which will also take effect from 6 July.

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"Whether that's threatening our technology leadership through intellectual property theft or forced technology transfer, we are hard at ensuring that we protect American property", he said. "It is very unfortunate that instead of eliminating these unfair trading practices China said that it intends to impose unjustified tariffs targeting U.S. workers, farmers, ranchers, and businesses". If Trump carries through on all his trade threats, the result would be higher costs on virtually all the goods that the US imports from China.

"We don't want a trade war, but we're not afraid of a trade war, " ministry spokesman Geng Shuang said.

China's commerce ministry called the additional $200 billion in import taxes "extortion" and promised to "fight back forcefully" (paywall).

Stocks are sliding and bonds are rallying as fears mount about an escalating U.S.

"China has a farily predictable pattern of responding immediately and with pretty stiff tariffs", says Ron Kirk, U.S. Trade Representative under President Obama and now a partner at the law firm Gibson, Dunn and Crutcher.

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"However, and unfortunately, China has determined that it will raise tariffs on Dollars 50 billion worth of United States exports".

The move quickly drew praise from former Trump senior adviser Steve Bannon, who told The Associated Press: "President Trump told China and the world tonight that America will not back down when it comes to economic aggression". The US imported $2.7bn worth of Chinese seafood in 2017 compared to the $1.3bn worth of seafood it sent to China, based on data from the National Oceanic and Atmospheric Administration.

It was retaliation, Trump said, for China's decision to raise tariffs on $50 billion in US goods, which came after Trump announced similar tariffs on Chinese goods on Friday.

"The United States has initiated a trade war that violates market laws and is not in accordance with current global development trends", it added. This is unacceptable. Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States.

"Trump appears to be employing a similar tactic he used with North Korea, by blustering first in order to gain an advantage in negotiations".

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Beijing immediately retaliated, matching the U.S. levy. Trump slapped tariffs on steel and aluminum from Canada, Mexico and the European Union, threatened to kill the North American Free Trade Agreement and is studying new tariffs on auto imports.

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