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Global trade war: China hits back with retaliatory taxes on US imports, markets dive

The commerce ministry is planning an internal meeting with  senior economists and foreign policy experts ahead of the visit of the Chinese trade minister.

Published: 24th March 2018 05:54 AM  |   Last Updated: 24th March 2018 09:33 AM   |  A+A-

By Express News Service

Beijing imposes 15% tariff on 120 goods worth almost $1 billion, including fresh fruit, nuts and wine; 25% on eight goods worth nearly $2 billion, including pork and aluminium scrap; commerce ministry in India plans internal meet, weighs options.

Markets across the world took a beating late Thursday and Friday after US President Donald Trump followed through his earlier metal import tariffs with an executive memorandum directing the US trade representative to level tariffs on around $60 billion worth of Chinese imports.

“This has been long in the coming” Trump said, going on to accuse China of stealing six million US jobs and perpetrating massive intellectual property theft worth “hundreds of billions of dollars”. The US Trade Representative Robert Lighthizer also dragged China to the World Trade Organisation (WTO) on Friday alleging Chinese denial of basic patent rights to foreign firms and imposing mandatory adverse contract terms.

READ HERE | Why India has to keep a close watch on developments as world inches closer to trade war

 

China on Friday said it was “ready to fight a trade war” and unleashed its own proposal to levy retaliatory taxes on imports of 128 US products worth $3 billion.The back and forth between the two global economic superpowers saw stock markets take a pounding, especially in the US and Asia. India’s Sensex and Nifty mirrored the global trend. However, market volatility was minimal in the hope that the implications on India aren’t as destructive as it appears, at least for now.

But, for India, macro risks are rising “even though the economy has some buffers,” pointed out Radhika Rao, India Economist, DBS Bank, adding that in the immediate term “sentiments and the rupee remain susceptible to US monetary policy trajectory and trade war concerns”.

ALSO READ | India may want to retaliate, says US Trade Representative on high import tariffs

If the situation escalates into a free-for-all trade war “our exports are bound to be buffeted. The expected double digit growth in exports in FY19 may not happen,” CARE Ratings said.

The commerce ministry is planning an internal meeting with senior economists and foreign policy experts ahead of the visit of the Chinese trade minister. “Commerce ministry is weighing options on taking a stance as they are the two most important markets for India,” an official with DGFT told The New Indian Express.

Trade barriers to harm global economy: WTO

WTO Director-General Roberto Azevedo warned states that creating barriers to international trade would “jeopardise the global economy at a time when economic recovery, though fragile, has been increasingly evident around the world” and called for “restraint and urgent dialogue”. “Actions taken outside these collective processes greatly increase the risk of escalation in a confrontation that will have no winners, and which could quickly lead to a less stable trading system,” he said.

READ HERE | US accuses China of stealing patents in WTO complaint

Trade deficit costs jobs: White House

Senior White house officials on Friday defended US President Donald Trump’s move, stating that every billion of trade deficit costs the US around 6,000 jobs. “By some calculations, every billion dollar of trade deficit that arises from market-distorted policies, costs us about 6,000 jobs. A very conservative calculation, by some estimates, is that trade deficit results in about two million more jobs in China and two million less here. This is a problem we are aware of,” an official said.

ALSO READ | Trade war: Extent of US-China trade fight depends on Trump's goals

How it happened

US moves first

  • US President Donald Trump signs an executive memorandum on Thursday proposing tariffs on up to $60 billion of Chinese imports

  • Donald Trump says tariffs on Chinese goods will help redress the US’s $375bn trade deficit with China, and accuses China of stealing six million US jobs

  • 1,300 Chinese products might attract higher tariffs according to reports

  • The US also plans to impose new investment restrictions and take action against China at the World Trade Organisation

  • US Trade Representative says Chinese firms steal software, patents and tech secrets from US firms that are mandated to enter China through joint ventures

  • £35bn worth of Chinese imports to the US will be affected by the first salvo of tariffs on steel and aluminium

China retaliates

  • China’s Commerce Ministry proposes a list of 128 U.S. products as potential retaliation on Friday.

  • US goods with an import value of $3 billion in 2017 could be targeted -- including wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol, and ginseng.

  • Above products could see 15% duty imposed, while 25% tariff could be imposed on US pork and recycled aluminum goods.

 



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