China said on Monday it would impose higher tariffs on a range of US goods including frozen vegetables and liquefied natural gas, striking back in its trade war with Washington after US President Donald Trump warned it not to.
The move, widely expected after the US last week raised tariffs on $200 billion in Chinese imports, heightened fears the world’s two largest economies were spiralling into a no-holds-barred dispute that could derail the global economy.
China’s finance ministry said it plans to set import tariffs ranging from 5 per cent to 25 per cent on 5,140 US products on a revised $60 billion target list. It said the tariffs will take effect on June 1.
“China’s adjustment on additional tariffs is a response to US unilateralism and protectionism,” the ministry said. “China hopes the US will get back to the right track of bilateral trade and economic consultations and meet with China halfway.” The White House and US Trade Representative’s office did not immediately respond to requests for comment.
Global equities tumbled, with MSCI’s gauge of stocks across the world on pace for its biggest one-day drop of 2019. Major Wall Street stock indexes were down about 2.5 per cent.
China's yuan currency fell to its lowest level since December.
"It's clear that there is a lot of nervousness around the US-China trade negotiations and concern that it's really deteriorating pretty significantly, and that's impacting all areas of markets," said Kristina Hooper, chief global market strategist at Invesco in New York.
Earlier on Monday, Trump told China not to intensify the trade dispute and urged its leaders, including President Xi Jinping, to continue to work to reach a deal. "China should not retaliate-will only get worse," Trump said on Twitter.
"I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries," he wrote.
The US president, who has embraced protectionism as part of an "America First" agenda, stepped up his verbal attacks on China on Friday after two days of high-level trade talks in Washington ended with the two sides in an apparent stalemate.
Top White House economic adviser Larry Kudlow said on Sunday there was a "strong possibility" Trump will meet Xi at a G20 summit in Japan in late June.
STEADY DRUM BEAT
Trump has accused China of reneging on commitments it made during months of trade negotiations, which Beijing has denied.
China tried to delete commitments from a draft agreement that its laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers. That dealt a major setback to the talks.
In the middle of the negotiations last week, Trump hiked tariffs on Chinese goods to 25% from 10%. The move affected 5,700 categories of Chinese products including internet modems, routers and similar devices.Trump has since ordered US Trade Representative Robert Lighthizer to begin the process of imposing tariffs on all remaining imports from China, a move that would affect another $300 billion worth of goods.
US tariffs last year triggered retaliation by China, which imposed 25 per cent levies on $50 billion worth of US products including soybeans, beef and pork and lower tariffs on a list of $60 billion in goods.
Beijing said on Monday it would "never surrender" to external pressure, and its state media kept up a steady drum beat of strongly-worded commentary, reiterating that the door to talks was always open, but vowing that China would defend its national interests and dignity.
In a commentary, state television said the effect of the U.S. tariffs on the Chinese economy was "totally controllable." "It's no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger."Trump has said he is in "no rush" to finalize a deal with China. In a tweet released after Beijing's latest retaliation, he again defended the move to hike U.S. tariffs and said there was no reason why American consumers would pay the costs.
Economists and industry consultants, however, maintain that it is U.S. businesses that will pay the costs and likely pass them on to consumers. Consumer spending accounts for more than two-thirds of U.S. economic activity.
In a research note, Goldman Sachs economists said new evidence showed the costs of Washington's tariffs on China last year had fallen entirely on U.S. businesses and households, with no clear reduction in prices charged by Chinese exporters.
They added that the effects of the tariffs had spilled over noticeably to the prices charged by U.S. producers competing with goods affected by the levies.
The Trump administration has rolled out up to $12 billion in aid for US farmers hurt by Chinese tariffs during the 10-month trade war, and indicated that more help could be on the way. Farmers, who are a core political constituency for Trump's Republicans heading into the 2020 presidential and congressional elections, are growing increasingly frustrated with the protracted trade talks and the failure to reach an agreement.
"What that means for soybean growers is that we're losing.
Losing a valuable market, losing stable pricing, losing an opportunity to support our families and our communities," said Davie Stephens, president of the American Soybean Association.