China’s announcement of an extra tariff of 50 per cent on American imports was in retaliation to Donald Trump’s latest escalation of the trade war between the world’s two biggest economies. But with the US tariff on Chinese goods at least 104 per cent and the Chinese tariff of US imports 84 per cent, the prospect of economic decoupling has become a real one.
The new Chinese tariff on US goods comes into force on Thursday, and Beijing’s commerce ministry also announced export controls on 12 US companies. The ministry added six more American companies to a host of unreliable entities, which are effectively excluded from doing business in China.
China’s retaliation to Trump’s tariffs has been tougher than any other country’s, but while Beijing has matched Washington’s latest moves, it has been careful to leave the door open to negotiation. Hours before Wednesday’s announcement, the Chinese government published a 25-page white paper hailing the importance of the US-China trade relationship and offering to work with Washington on improving the global trading system.
“History tells us that co-operation between China and the US is of great mutual benefit, while confrontation will bring nothing but damage to both sides,” the white paper said.
“Trade wars produce no winners, and protectionism leads up a blind alley. The economic success of both China and the US presents shared opportunities rather than mutual threats.”
Beijing has not commented on rumours that it may be behind some of the sell-offs in US Treasury bonds, which were traditionally a safe haven when equities are under pressure. But its white paper noted another potential US vulnerability in the trade war: the fact that it enjoys a trade surplus in services with China.
China is the biggest export market for American soya beans and cotton, the second biggest for integrated circuits and coal and the third-largest for medical devices, liquefied natural gas and cars. Its biggest exports to the US are electrical machinery, mechanical appliances, furniture, toys and plastics.
