A steep 84 percent tariff on all United States goods entering China has kicked in, ratcheting up a trade war with Washington while calling for a dialogue “on the basis of mutual respect and equality”.
The new rate – a 50 percent hike on Beijing’s previous 34 percent levy on US goods – took effect at 12:01am Eastern Time [04:00 GMT] on Thursday, according to China’s State Administration Council. It applies to all US products entering the world’s second-largest economy, which, according to the office of the US Trade Representative, totalled $143.5bn last year.
This marks China’s second retaliatory tariff hike in response to US duties on Chinese imports, which now stand at 125 percent. Alongside the new tariffs, Beijing has also blacklisted 18 US companies, including aerospace manufacturer Sierra Nevada Corporation.
Also on Thursday, China’s Ministry of Commerce said that China is open to a dialogue with the US but this must be on the basis of mutual respect and equality.
Pressure, threats and blackmail are not the right way to deal with China, ministry spokesperson He Yongqian told a press briefing when asked about whether the world’s two largest economies have started tariff negotiations.
China will “follow through to the end” if the US insists on its own way, He added.
World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala warned that the escalating trade feud could slash US-China trade by as much as 80 percent, with grave implications for the global economy.
“Of particular concern is the potential fragmentation of global trade along geopolitical lines,” she said. “A division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly 7 percent.”
‘Nothing’s over yet’
The US-China tit for tat comes as US President Donald Trump walks back a broader set of global tariffs that had triggered a sharp stock market selloff and stoked fears of a recession.
On Wednesday, Trump announced a 90-day pause on previously announced “reciprocal” tariffs targeting about 60 countries – excluding China – while leaving a 10 percent baseline tariff in place.
Markets responded with relief: the US’s benchmark S&P 500 and Nasdaq stock indexes surged 9.5 percent and 12.16 percent respectively, snapping a brutal weeklong decline.
Stocks across Asia also rallied on Thursday, with gains in Hong Kong, Tokyo, Taipei, Australia, Indonesia and Singapore.
The White House said the tariff pause was a reward for countries that refrained from retaliating against US trade moves. Trump, meanwhile, blasted China for showing “a lack of respect” towards global markets and for “ripping off” the US.
However, later in the day, Trump struck a more conciliatory tone and left the door open for a deal with China.
“Look, nothing’s over yet, but we have tremendous amount of spirit from other countries, including China,” Trump said outside the White House. He insisted that Beijing “wants to make a deal” but “just don’t know quite how to go about it”.
“It’s one of those things. They’re proud people,” said Trump.
‘China will continue to retaliate’
Still, analysts warned that Trump’s hardline approach towards China could prolong the standoff.
“I think if the current pattern stands, China will continue to retaliate until there starts to be some kind of progress,” said Sophia Busch, the assistant director at the Atlantic Council’s GeoEconomics Center. “We’ve seen that Beijing is very comfortable and has plenty of practice with these kinds of coercive economic tools.”
“Trump’s singling out of China will likely reinforce the view in Beijing that there is a coherent strategic plan to contain and suppress China,” said Bill Bishop, an American journalist and China analyst.
Trump has defended his tariff policy as a way to revive US manufacturing by pressuring companies to bring production back to the country. He argues that China, in particular, is undercutting US industries by “dumping” cheap, excess goods onto global markets.
With tensions still high, China on Wednesday warned its citizens to “fully assess the risks” before travelling to the US.