US Moves Toward Tariff Hikes on Another $300 Billion in Chinese Goods

Galtero Lara
May 16, 2019

The United States has declared war on China in all but name, with President Donald Trump intent on regaining American primacy he says was forfeited by his predecessors Barack Obama and George Bush, a Democrat and a Republican.

Stocks, which took a beating on Monday after Trump late on Friday threatened a new round of tariffs on about $300 billion worth of remaining imports from China, gained strength after Trump's comments, with the tech-driven Nasdaq up 1.47% in midday trade.

Trump has said he would meet with Chinese President Xi Jinping next month, with focus now turning to an upcoming G20 meeting. And U.S. President Donald Trump said he was optimistic about resolving the trade dispute.

Trump earlier tweeted that a deal would happen and appealed to China to buy US farm products.

On Wall Street, futures for the Standard & Poor's 500 index and Dow Jones industrial average were up less than 0.1%.

China's economy lost steam in April, underscoring the fragility of the world's second-largest economy as it girds for an intensified face-off with the USA over trade.

In a series of tweets, Trump promised a new deal with China would be reached soon and made a case for how farmers would benefit from a tariff increase that many of them oppose.

Soybeans, the most valuable US crop, bounced off a decade low on Tuesday as the market's focus shifted to planting delays due to poor weather, which could reduce crop size.

"I happen to think that tariffs for our country are very powerful". The Farmers have been "forgotten" for many years.

"The trade war is driving markets at the moment", said Rory McPherson, head of investment strategy at Psigma Investment Management in London.

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However, with tariffs on US$200 billion of Chinese goods having risen to 25 per cent and further 25 per cent tariff to be applied to most of the remaining Chinese exports to America, valued at around US$300 billion, it remains to be seen what tools Beijing has in its arsenal to defend its economy. It said a June 17 hearing would be held before Washington decides how to proceed.

Trump said he could make a deal with Beijing now, but said he would not be burned again and criticized China for last-minute attempt to renegotiate. The USTR noted it excludes pharmaceuticals and rare earths minerals used in electronics and batteries.

Over the past week, the world's two largest economies have exchanged tit-for-tat tariffs, as it looked like chances of a near-term trade deal - which had appeared to be growing only two weeks ago - have dwindled.

Beijing is running out of US imports to penalize due to their lopsided trade balance.

At the same time, China has sought to support its economy as it battles a slowing economy and the trade war.

And she cautioned that consumers "at the low end of the income strata are particularly vulnerable to higher prices at the pump and the pending tariffs on China".

"My understanding is that China and the United States have agreed to continue pursuing relevant discussions. If someone brings the war to us we will fight it until we win", Geng Shuang told reporters at a daily briefing.

In April alone, total output fell 0.5 percent, driven by a decline of the same magnitude in manufacturing, as vehicle production continued to slip.

Sources have said talks stalled after China tried to delete commitments from a draft agreement that its laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers.

"So you absolutely can't put the hat on China of reversing positions and going back on one's promises", Geng said, adding China had shown goodwill in the talks and kept its promises. China's Foreign Ministry said on Tuesday it hoped the United States did not "underestimate China's determination and will to safeguard its interests".

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