Business

China retaliates, slaps duties on U.S. soybeans, planes; markets skid

China hit back quickly on Wednesday against the Trump administration’s plans to slap tariffs on $50 billion in Chinese goods, retaliating with a list of similar duties on key U.S. imports including soybeans, planes, cars, beef and chemicals.

The speed with which the trade struggle between Washington and Beijing is ratcheting up – China took less than 11 hours to respond with its own measures – led to a sharp selloff in global stock markets and commodities. [MKTS/GLOB]

U.S. President Donald Trump denied that the tit-for-tat moves amounted to a trade war between the world’s two economic superpowers.

“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.,” Trump wrote in a post on Twitter early on Wednesday.

Investors were wondering, nonetheless, how far one of the worst trade disputes in many years could escalate.

“The assumption was China would not respond too aggressively and avoid escalating tensions. China’s response is a surprise for some people,” said Julian Evans-Pritchard, Senior China Economist at Capital Economics, noting that neither side had yet called for enforcement of the tariffs.

U.S.-made goods that appear to face added tariffs in China based, on an analysis of Beijing’s list, include Tesla electric cars, Ford’s Lincoln auto models, Gulfstream jets made by General Dynamics and Brown-Forman Corp’s Jack Daniel’s whiskey.

Unlike Washington’s list, which was filled with many obscure industrial items, China’s list strikes at signature U.S. exports, including soybeans, frozen beef, cotton and other key agricultural commodities produced in states from Iowa to Texas that voted for Donald Trump in the 2016 presidential election.

While Washington targeted products that benefit from Chinese industrial policy, including its “Made in China 2025” initiative to replace advanced technology imports with domestic products in strategic industries such as advanced IT and robotics, Beijing’s appears aimed at inflicting political damage.

Tobacco and whiskey, for example, are both on Beijing’s list and are produced in states including Kentucky, home of Senate Majority Leader Mitch McConnell.

“It’s more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force,” said Evans-Pritchard.

Beijing’s list of 25 percent additional tariffs on U.S. goods covers 106 items with a trade value matching the $50 billion targeted on Washington’s list, China’s commerce and finance ministries said.

The effective date depends on when the U.S. action takes effect.

“This is a real game changer and moves the trade dispute away from symbolism to measures which would really hurt U.S agricultural exports,” said Commerzbank commodities analyst Carsten Fritsch. (Reuters)

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