Published: Fri, June 22, 2018
Economy | By Melissa Porter

China accuses Trump of 'blackmail' after new tariffs threat

China accuses Trump of 'blackmail' after new tariffs threat

A rush to beat the tariffs imposed by the USA and China in the latest trade spat could spark a change in freight movements and rates.

USA soybean futures were among the biggest casualties after President Donald Trump threatened to impose a 10 percent tariff on another $200 billion of Chinese goods, a threat that China's commerce ministry described as "blackmailing", vowing to retaliate.

Given the imbalance in American and Chinese trade, Beijing has a more limited set of options for adding to its list of tariffs.

On Friday, Trump said he was pushing ahead with a 25 percent tariff on $50 billion worth of Chinese products, prompting Beijing to respond in kind.

Trump's proposed new tariffs would amount to the latest round of punitive steps in an escalating rift between the world's two largest economies.

China's Commerce Ministry criticised the latest threat of tariffs, saying it was an "act of extreme pressure and blackmail that deviates from the consensus reached by both parties after many negotiations, and is a disappointment to the worldwide community".

Analysts warned that the risks are growing of an increasingly damaging clash that will ripple around the globe.

The Federal Reserve had on Wednesday said that it would likely hike USA rates twice more this year and four times in 2019, highlighting an increasing divergence between the two central banks. "Attitudes seem to be hardening".

The tariffs, which the U.S. government said were punishment for intellectual property theft, will be enacted in two waves. More than 800 exports, about $34 billion worth, will be subject to tariffs starting July 6.

Another 280 or so still need to undergo a public comment period, and will take effect later, CNN reported.

"This all shows how quickly trade tensions could escalate between the United States and China", said Derek Halpenny, European head of global markets research at MUFG Bank. China's tariffs would target agricultural products, cars and seafood, among other items.

He condemned China's "unfair practices related to the acquisition of American intellectual property and technology" and added: "Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong".

The potential tariffs announced by Trump come as the us and China both announced plans to impose tariffs on up to $50 billion worth of goods imported from the other country.

Trump also said that if China retaliates yet again, the United States would pursue additional tariffs on another $200 billion of goods.

Initially, 545 U.S. products valued at $34 billion will be targeted by China, mimicking the Trump administration's tariff rollout.

Despite the harsh words from high-level officials, Navarro tried to downplay the economic downsides of the tariffs, calling them "relatively small" and insisting the eventual results of the fight would be positive.

Further market falls could also trigger a vicious cycle of selling, as a large proportion of shares in China's stock market are pledged against loans, and could potentially face margin calls, he said. Beijing matched that total with a tax on USA goods. But the tit-for-tat expansion of tariffs has USA oil industry officials and politicians calling on the Trump administration to move cautiously.

But Asia's other trade-reliant economies and companies plugged into China's supply chains are anxious they will suffer collateral damage if world trade slows down, hurting global growth and dampening business confidence.

Big industrial companies and chemical makers are hard hit. That could bolster longer-term confidence in the currency union, which has been hobbled by a lack of a central pot of money to help investment in individual countries.

China, however, appears to have left the way open for negotiations, saying it was "too early to conclude that a trade war will start". And Beijing says it would impose tariffs on $16 billion more if the United States does so, too.

It was not immediately clear when the new tariffs could be put in place, as the trade office has yet to identify the Chinese goods to be penalised or conduct a legal review.

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