Published: Thu, July 12, 2018
Worldwide | By Jermaine Blake

United States tech firms may feel brunt of China's trade counter attack

United States tech firms may feel brunt of China's trade counter attack

The Trump administration raised the stakes in its trade dispute with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports.

The eventual goal is to impose tariffs on 40 percent of Chinese imports, the same proportion of United States goods hit by Beijing's retaliation, an official told reporters. It's unclear what that action could include.

President Donald Trump has said he may ultimately impose tariffs on more than $500 billion worth of Chinese goods - roughly the total amount of United States imports from China past year.

The Trump administration announced Tuesday that it would impose a 10 percent tariff on $200 billion of Chinese imports, just days after it implemented a 25 percent tariff on $34 billion of Chinese imports.

If China responds with tariffs on energy, this could cut sales of USA energy goods, analysts and executives told Reuters last month, when Beijing first threatened to slap tariffs on us energy.

China "cannot match fresh US tariffs", Vishnu Varathan of Mizuho Bank said in a report.

The additional tariffs could affect as much as $468bn in trade between the two countries, with the possibility of an ever more expansive levies that US President Donald Trump threatened to impose on China.

"The Chinese government as always will have no choice but to take the necessary countermeasures", said China's ministry of commerce in a statement, without elaborating further.

But China has rebuffed US complaints and denied any harm was done to USA companies, and instead retaliated "without any worldwide legal basis or justification", Lighthizer said.

In financial markets, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.5 per cent, while the main indexes in Hong Kong and Shanghai fell more than 2 per cent.

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The United States is playing a unsafe game as China is one of the United States' most important trading partners, with about $630 billion (-$130 deficit) in trade done in 2017, not far behind Canada ($670 billion, +$8 billion surplus) and just ahead of Mexico ($616 billion, -$64 billion deficit).

Some U.S. business groups and lawmakers from Trump's own Republican Party were critical of the escalating tariffs.

'Tariffs on $200 billion in Chinese products amounts to another multibillion-dollar tax on American businesses and families, ' trade lawyer Scott Lincicome said.

"As in the past, the United States is willing to engage in efforts that could lead to a resolution of our concerns about China's unfair trade practices and to China opening its market to U.S. goods and services", he added. "It will also result in retaliatory tariffs, further hurting American workers", a Chamber spokeswoman said.

But U.S. Trade Representative Robert Lighthizer said the 10 percent duties, which also cover many consumer products that may also contain unlisted plastics components, are needed to put more pressure on China.

The officials said they tried to target goods that would reduce the harm to US consumers.

The latest round of proposed tariffs come a few days after the USA government unveiled procedures for companies to apply for exclusions from the first round of tariffs, which went into effect July 6.

China's exports have mushroomed since it joined the World Trade Organisation in 2001, making it the world's second-largest economy and prompting widening criticism in recent years from trading partners that it has unfairly used global trade rules to its advantage.

China's government has criticized the latest United States threat of a tariff hike as "totally unacceptable" and vowed to retaliate in their escalating trade war.

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