(Aug 23): China threatened to impose additional tariffs on US$75 billion ($104 billion) of American goods including soybeans, automobiles and oil, in retaliation for President Donald Trump’s latest planned levies on Chinese imports that pushed US stocks and farm commodities lower.
Some of the countermeasures will take effect starting Sept 1, while the rest will come into effect from Dec 15, according to the announcement Friday from the Finance Ministry. This mirrors the timetable the US has laid out for 10% tariffs on nearly US$300 billion of Chinese shipments.
An extra 5% tariff will be put on American soybeans and crude-oil imports starting next month. The resumption of a suspended extra 25% duty on US cars will resume Dec 15, with another 10% on top for some vehicles. With existing general duties on autos taken into account, the total tariff charged on US made cars would be as high as 50%.
China’s tariff threats take aim at the heart of Trump’s political support -- factories and farms across the Midwest and South at a time when the US economy is showing signs of slowing down. Soybean prices sank to a two-week low.
The move drew a sharp reaction from Trump that sent stocks tumbling further on concern the talks are falling apart. “We don’t need China and, frankly, would be far better off without them,” he tweeted. “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
Among automakers, Tesla Inc. and Germany’s Daimler AG and BMW AG are the most vulnerable to the additional levies. Shares of the two German companies fell more than 2% in Frankfurt, while Tesla dropped 2.2% in New York.
BMW and Daimler ship large numbers of sport utility vehicles from plants in South Carolina and Alabama to China, while Tesla doesn’t yet make its electric cars in the country. Six of the top 10 vehicles exported from the US to the world’s biggest car market are from the two German brands, according to forecaster LMC Automotive.
US stocks dropped along with Treasury yields and oil prices. Emerging-market currencies also declined, while havens such as the yen and gold gained.
The tariffs beginning in September include 10% on pork, beef, and chicken, and various other agricultural goods, while soybeans will have the extra 5% tariff on top of the existing 25%. Starting in December, wheat, sorghum, and cotton will also get a 10% tariff.
While China will impose a new 5% levy on oil, there was no new tariff on liquefied natural gas.
In Washington, the initial reaction from the White House was aimed at easing concerns about the fallout. “The amount of money being tariffed is not material in terms of macro growth,” Trump adviser Peter Navarro said on Fox Business Network. The retaliation will “absolutely not” slow growth, he said.
China’s announcement comes as leaders from the Group of Seven nations prepare to meet in France and central bankers gather in Jackson Hole, Wyoming, to discuss issues such as the global slowdown. The Chinese announcement was foreshadowed by a tweet from Hu Xijin, the editor-in-chief of the Global Times, a newspaper controlled by the ruling Communist Party.
China promised earlier this week that any new tariffs from the US would lead to escalation and retaliation. The US has said it will put 10% tariffs on some US$110 billion of Chinese goods starting Sept 1 and the same levy on another US$160 billion on Dec. 15, a staggered approach aimed at ease the impact on the American economy.
After Trump gave the go-ahead earlier this month for tariffs on the nearly $300 billion in Chinese imports that haven’t been hit by higher duties, China halted purchases of agricultural goods and allowed the yuan to weaken.
Since then, negotiators have spoken by phone and are planning another call in coming days. People familiar with their intentions previously said that the Chinese delegation is sticking to their plan to travel to the US in September for face-to-face meetings, which may offer a chance for further reprieve.
The US side is still hoping for that visit to happen, with Trump’s economic adviser Larry Kudlow telling Fox Business Network that “hopefully we are still planning on having the Chinese team come here to Washington D.C. to continue the negotiations.”
“I don’t want to predict, but we will see,” Kudlow said on Thursday in Washington.
