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China will retaliate in trade war, says Commerce Ministry

China will retaliate in trade war, says Commerce Ministry

China will go on the defensive and retaliate again if the United States goes ahead with plans to roll out tariffs measures, the country's Commerce Ministry said on Thursday.

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By Jay Banerjee 07.09.2018

China will go on the defensive and retaliate again if the United States goes ahead with plans to roll out tariffs measures, the country’s Commerce Ministry said on Thursday. Tensions between the world’s two biggest economic players are ratcheting up after a summer of conflict.

Global markets showed mixed results this week as concerns mount about the possibility of new tariffs. US President Donald Trump recently threatened to introduced levies on a further $US200bn worth of Chinese imports, and recent reports suggested that they could arrive before the end of the week.

In a regular news conference on Thursday. China’s Commerce Ministry Spokesperson, Gao Feng, said that the country will be “forced” to act if the US implements new tariffs. He added: “If the United States, regardless of opposition, adopts any new tariff measures, China would be forced to roll out necessary retaliatory measures."

Gao also revealed that China is watching the situation closely and will analyze the impact of a new round of tariffs to better inform its measures. He said that strong intervention might be necessary to support both domestic enterprises and foreign companies operating on the mainland to ensure that they can cope with the latest challenges.

A public comment period expired in Washington at midnight on Thursday, so the Trump administration could immediately pave the way for fresh levies. However, people close to the matter have informed Reuters that the exact timing is not yet known, so the tariffs could arrive next week.

The latest duties will cover a range of consumer products directly for the first time, with car seats for infants, furniture and tires among the listed goods. The new round comes after a summer of escalating conflict, and a tit-for-tat battle from early July onward encompassed goods worth $US50bn on both sides. The war has hit financial markets, crimping investor sentiment and causing issues for policymakers who fear that a prolonged battle may have a detrimental impact on long-term growth globally.

Trump instigated the conflict as a gambit to force China to overhaul its financial and economic policies. He wants Beijing to open its market for easier access, enforce intellectual property protections for US enterprises, reduce its sizeable trade deficit of US$375bn and do likewise for industrial subsidies. However, there are no signs that the world’s two biggest economies are finding any common ground, and recent mid-level trade talks in Washington came to nothing.

Global business appears to have weathered the trade storm well thus far, but there are fears that any further duties will lead to greater conflict and negatively affect growth, investment and trade during the final months of the year and into 2019.

China’s desire to retaliate is not a surprise, as it followed a similar playbook for the initial round of tariffs in the summer. Last month, China stated that it would introduce tariffs on liquified natural gas (LNG) and other products worth US$60bn after the US outlined its latest raft of measures.

Trump said that he is in it for the long haul and made his stance clear again on Wednesday when he commented that the US is not yet prepared to come to the table to come to an agreement. However, he did say that talks with China would continue.

Meanwhile, Daiwa Capital Market said on Thursday that the outlook for consumer spend in Asia is healthy despite the ongoing tensions, as positive fundamentals will support growth. UBS also said that Chinese authorities are ready and waiting to provide policy support to ensure that there is not a drop-off in spending.

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