Published: Fri, July 06, 2018
Money | By Wilma Wheeler

China rejects ‘blackmail’ on eve of U.S. tariff hike

China rejects ‘blackmail’ on eve of U.S. tariff hike

He made the assertion to reporters in Beijing amid uncertainty in the Chinese capital around President's Trump's threat to begin imposing on Friday some $34 billion in tariffs on imports from China to the United States as part of the administration's push to address a U.S.

China says it's "fully prepared" for a trade war with the United States if it kicks off in earnest on Friday.

As hopes of stopping the two leading economic superpowers entering a long and damaging trade war dwindles, Beijing issued a stinging attack on the USA president.

Trump for President, Inc., the committee organizing Trump's reelect run, has publicly committed to buying American, saying that "we put America First and take great pride in selling 100% Made in the U.S. products to our supporters throughout the country".

The Trump team has paid little heed to those concerns and Commerce Secretary Wilbur Ross this week called the warnings "premature and probably quite inaccurate".

But Trump has said his administration will respond to retaliation from Beijing with tariffs on as much as $400 billion of Chinese goods, raising the prospect of worsening tit-for-tat reprisals.

The US will implement a 25% tariff on $34bn of Chinese imports - on 818 product lines ranging from cars to vaporisers and "smart home" devices - on Friday.

But the European Union, the world's largest trading bloc, has rejected the idea of allying with Beijing against Washington, five European Union officials and diplomats told Reuters, ahead of the summit.

A second tranche of 284 goods valued at US$16 billion - which would bring the total to US$50 billion - will be targeted after they undergo an additional process of review and public comment, which could lead to a lower total.

China cannot match Trump on tariffs - it imported $130 billion in goods from the United States previous year, compared with America's $505 billion in purchases from China - but it can apply other forms of pressure, analysts say. "The trade war is a constant overhang for the markets and I don't see it being removed any time soon".

"China will not bow in the face of threats and blackmail, nor will it be shaken in its resolve to defend global free trade", said ministry spokesman Gao Feng at a press conference.

Beijing will impose duties on almost 30 billion dollars of American products.

Countries are ranked by how integrated they are into the global value chain.

China said that it wouldn't implement tariffs ahead of the United States on Friday, after previous arrangements put it on course to do so.

Prices are rising, especially for steel and aluminum, and companies are starting to feel reticent about investments or plan to shift production overseas to avoid retaliation against United States exports. In the scenario where the U.S. and China just stick to this round of tariffs - $50bn of imports - and go no further, then the drag on China's economy would be 0.2% point of growth in 2019, according to Bloomberg Economics' calculations. The countries most at risk are those which supply raw materials to other countries, which then use those raw materials in the production of goods for export.

In Beijing, policy makers are digging in for what could be a protracted fight - one they say they won't be the aggressor in.

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