Trump proposes raising tariffs to 25% on $200 billion of Chinese imports

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"China has made full preparation for the USA threats to escalate the trade war, and will have to retaliate to defend national pride and the people's interests", China's Ministry of Commerce said in a statement Thursday on its website.

"China is fully prepared for the United States' threats to escalate the two countries' trade war and will have to fight back to defend its dignity and the interests of its people", it said in a statement posted on its website. The United States is far and away the most popular place for such investment, given the size and liquidity of markets for USA government debt and policies that are very friendly to foreign investors other financial assets and real estate.

Representatives of U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have been speaking privately as they seek to restart negotiations to defuse the budding trade war, Bloomberg reported, citing sources. "He's going to continue to put the pressure on China".

Foreign Ministry spokesman Geng Shuang made the comment at a daily news briefing in Beijing.

Geng said, "We would advise the United States to correct its attitude and not try to engage in blackmail". The rising tensions between the two nations have weighed on stock and currency markets, with the Chinese yuan falling against the dollar.

China already has retaliated with tariffs, hitting USA farm products in particular.

Trump recently threatened to slap punitive tariffs on all Chinese imports, which accounted for more than $500 billion past year.

China has flagged it will retaliate if Trump goes through with the even higher tariffs. The United States slapped duties on $34 billion worth of Chinese goods, provoking a similar response from China.

The officials told reporters on a background call that Trump had directed U.S. Trade Representative Robert Lighthizer to consider the higher tariff rate as part efforts to ensure that it has "the right tools in place in order to encourage China to change its actions".

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It's unclear if the Chinese government is purposely pushing the value of its currency down or if that has been a market-based reaction to concerns about how USA tariffs could hurt China's economy.

Chinese authorities warned earlier that if the dispute escalated, they would adopt unspecified "comprehensive measures".

China promptly promised it would take countermeasures of its own.

The United States and China have the world's biggest trading relationship but official ties are increasingly strained over complaints Beijing's technology development tactics hurt American companies.

Trump said two weeks ago he is ready to impose tariffs on over $500 billion of Chinese imports.

But the move drew swift condemnation from USA business lobby groups anxious that tit-for-tat tariffs would start to hamper economic growth.

Erin Ennis, senior vice president of the US China Business Council, said a 10 per cent tariff on these products is already problematic, but more than doubling that to 25 per cent would be much worse.

"European Commission figures released this week showed that 37 percent of the EU's soybean imports in June came from the USA, compared with 9 percent in July 2017".

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