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TRADE WARS
China hits back as US trade tensions threaten economy
By Ryan MCMORROW
Beijing (AFP) June 16, 2018

US, China firms brace for escalating trade war
Beijing (AFP) June 16 - Companies and trade groups in the US and China have expressed concern over how the escalating trade spat between the world's two biggest economies could affect operations.

Beijing retaliated immediately to tariffs on tens of billions in Chinese imports imposed by US President Donald Trump on Friday, igniting a trade war that threatens to cut into the pair's massive bilateral trade -- potentially harming exporters and US multinationals keen on China's huge market.

Top among American products hit with duties by China are agricultural exports, with soybeans, sorghum, oranges, pork, poultry and beef included in the $34 billion in goods targeted for higher border taxes starting next month.

Agricultural trader Cargill, the largest US private company, called for dialogue between Beijing and Washington so businesses, farmers and consumers would not be caught up in an all-out trade war.

"Trade conflict... will lead to serious consequences for economic growth and job creation and hurt those that are most vulnerable across the globe," said Devry Boughner Vorwerk, a vice president at Cargill.

A spokeswoman for grain trader Archer Daniels Midland also said bilateral dialogue should be pursued, adding that China "continues to be an important export market for American food and agriculture".

Friday's announcements cap months of sometimes fraught shuttle diplomacy between Washington and Beijing, in which Chinese offers to purchase more US goods failed to assuage Trump's grievances over a soaring trade imbalance and the country's industrial development policies.

Beijing has left the door open to negotiations, even as it matched Washington with tariffs and bellicose rhetoric.

"The Donald Trump administration has once again proved inconsistent and precarious," state-run newspaper China Daily said in an editorial Saturday.

It added that given the "frequent flip-flopping" in the US, "it is still too early to conclude that a trade war will start".

- 'Fixated with tariffs' -

US trade groups also stepped up their criticism, while some large companies such as Boeing said they were beginning to evaluate the tariffs' possible effects.

Boeing garnered about 12.8 percent of its 2017 revenues from China and is frequently seen as among the more vulnerable US multinationals to a full-on trade war.

"We are assessing the impact these tariffs and any reciprocal action could have on our supply chain and commercial business," said Boeing spokesman Charles Bickers.

"We will continue to engage with leaders in both countries to urge a productive dialogue to resolve trade differences, highlighting the mutual economic benefits of a strong and prosperous aerospace industry," he added.

The American Apparel & Footwear Association -- while praising the Trump administration for dropping an earlier plan to place levies on key equipment and machinery used by the industry -- said Friday that China's retaliatory measures could harm American farmers and textile manufacturers and add costs to the industry's supply chain.

"President Trump is fixated with tariffs, which he believes he can wield freely; but there are grave consequences," said AAFA president Rick Helfenbein. "Congress needs to step in now to end this dangerous obsession."

Other trade groups opposing the US tariffs included the Business Roundtable and the US Chamber of Commerce.

US automakers, which have targeted China as a key growth market, are also slated to be hit by the bruising tariffs.

American auto giant Ford has sold 338,386 cars thus far in China in 2018, about one-third the number in the US, and had welcomed a Chinese plan to lower tariffs on auto imports. It had even planned to cut prices for its imported Lincoln vehicles.

Tit-for-tat tariffs on products worth tens of billions have left the US and China teetering on the brink of an all-out trade war, one Beijing can ill-afford with headwinds mounting for its economy.

US President Donald Trump announced tariffs Friday on Chinese imports valued at $34 billion -- with another $16 billion under consideration -- prompting an immediate response from Beijing on American products worth the same amount.

The confrontation between the world's two largest economies comes just as signs emerge that Beijing's drive to cut domestic debt is taking a toll on China's economic growth.

Economic data this week showed investment, a pillar of China's economy, sagging, while surging exports -- threatened by the US trade spat -- have provided a boost in recent months.

China's commerce ministry warned Trump's tariffs "threaten China's economic interests and security", in a statement outlining Beijing's response.

Washington is bent on violating global trade norms, it said, and "seriously violates China's rights and interests under World Trade Organization rules".

Trump has threatened further tariffs if Beijing retaliates, having previously said imports worth another $100 billion could be targeted.

"The trade dispute is escalating at a time when doubts about the domestic economic picture are rising," said Mark Williams, Asia Economist at Capital Economics, in a note.

- Political threat -

Two decades ago, China's economy was largely fuelled by exports, but it has made progress in rebalancing towards domestic investment and consumption since the global financial crisis erupted last decade -- limiting the damage trade tariffs could inflict on Beijing.

Still, strong exports this year have lifted the economy, which is now showing signs of losing steam under the weight of Beijing's war on debt, launched to clean up financial risks and rein in borrowing-fuelled growth.

The commerce ministry issued two lists of American goods -- worth $50 billion in total -- which will be hit with a retaliatory 25 percent tariff.

Initially, 545 US products valued at $34 billion will be targeted, mimicking the tariff rollout by the Trump administration.

These include major American exports to China like soybeans, which brought in $14 billion in sales last year, and are grown in states that supported Trump during the 2016 presidential election.

Politically important exports like other agricultural products and automobiles also made the list.

"If a trade war between the two becomes fierce, the result will not provide a favourable political environment for President Trump," China's nationalist tabloid Global Times warned in a Saturday editorial.

Beijing also drew up a second list of $16 billion in chemical and energy products to hit with new tariffs, though it did not announce a date for imposing them.

The $100 billion worth of targeted goods altogether represent a significant portion of the $636-billion two-way trade last year.

- Eroding advantages -

"There will be an impact on growth, in China, the US and elsewhere," said Louis Kuijs, head of Asia Economics at Oxford Economics, in a research note.

"Increased uncertainty and risks will weigh on business confidence and investment, especially cross-border investment."

Slowing credit growth has translated into lower investment, analysts say, as Chinese factories and workshops let up from their frenetic pace in May and retail sales slowed.

Fixed-asset investment during the first five months of the year flagged to its slowest pace since 1999 when data collection began, according to Bloomberg News.

Beijing's ambitious industrial policies and state intervention, which causes much of the frustration in Washington, is holding China back, according to Capital Economics' Williams.

"Policymakers' reluctance to allow market forces to determine economic outcomes is eroding the advantages that have kept China an economic outperformer for so long," he said.

"China's average growth over the coming decade is likely to be much weaker as a result."


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TRADE WARS
US launches another trade case against China
Washington (AFP) June 12, 2018
US President Donald Trump's Commerce Department on Tuesday announced another trade action involving Chinese imports, with producers of steel propane tanks accused of dumping and unfair subsidies. It is the latest in a series of disputes the Trump administration has taken up against Beijing, the largest of which are the looming 25 percent tariffs on $50 billion in Chinese goods amid complaints the country is stealing US technology. The frictions with the Asian giant, as well as the latest conflic ... read more

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