BEIJING: China vowed to retaliate after being hit with Donald Trump’s biggest tariffs yet, which threaten to decimate trade between the world’s largest economies.
The Chinese Ministry of Commerce condemned the US levies and pledged to hit back with unspecified measures in a statement Thursday (April 3, adding that the sweeping tariffs threatened the stability of global supply chains.
"China firmly opposes this and will resolutely take countermeasures to safeguard its own rights and interests,” the ministry said, urging the US to cancel the levies and resolve the conflict through dialogue.
Trump announced a 34% tariff hike on almost all Chinese products as he unveiled the steepest American tariffs in a century on partners around the world including the European Union and Japan. The new levies on Chinese goods will go into effect on April 9, the Republican leader said during a Wednesday event in the White House Rose Garden.
The latest tariffs bring average US tariffs on all Chinese products to as high as 65%, according to economists. That rate includes existing tariffs from the first Trump term that were maintained by the Biden administration.
The yuan weakened in both onshore and offshore markets after Trump’s move despite support from the central bank and big lenders. The offshore yuan slipped as much as 0.7% to 7.3484, down the most since December.
"Put simply: if Trump’s prior 20% tariff hikes took a hammer to US-China trade, today’s actions are a bazooka,” said Jennifer Welch, chief geoeconomics analyst for Bloomberg Economics.
Macquarie Group Ltd. estimated last year that China’s GDP growth could be reduced by 2 percentage points in the event of a 60% tariff rate. A simulation by Bloomberg Economics shows that the trade between the world’s largest economies would shrink to practically nothing with tariffs that high.
The official Xinhua News Agency published a commentary criticising Trump’s tariff offensive, calling it "self-defeating bullying.”
"By turning trade into an oversimplistic tit-for-tat game, Washington is dismantling a global trade system based on efficiency, specialisation and mutual benefit and hurting both the US economy and the global economy at large,” Xinhua said.
Beijing has retaliated against previous tariffs with levies on American products. China has also restricted exports of critical minerals and targeted additional US firms for investigation, steps it could take in response to Trump’s latest moves.
"These tariffs will put China under enormous pressure,” said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics in Washington.
"China’s retaliation to the latest two rounds was relatively muted, but today’s action could harden views in Beijing and lead to serious escalation far beyond tariffs,” he added.
The new so-called reciprocal tariff will add to a slew of US moves designed to curb the US’ trade deficit with China.
De Minimis tariff exemptions, which currently allow packages worth US$800 or less from China and Hong Kong to enter the US duty-free, will end on May 2, the White House announced Wednesday.
The tariff exemptions helped give rise to online marketplaces by Shein and PDD Holdings Inc’s Temu that ship goods directly to US shoppers from Chinese factories.
These actions by the US may prompt Beijing to add stimulus to the domestic economy to try to compensate for the likely hit to demand.
China’s economy was already struggling with a supply glut that was pushing down prices. That issue would likely be exacerbated by a decrease in exports because of the tariffs. - Bloomberg
