Beijing laid the groundwork for another round of “eye for an eye” tariffs in the us-China trade war, stating its readiness to respond if Washington introduces a new set of duties on $ 200 billion (£155 billion) of Chinese goods, which could happen this week.
The proposed new tariffs from Washington – levied at 25% of the value of thousands of specific products – would come on top of existing 25% tariffs on $50bn of Chinese exports, most of which kicked in on 6 July. China was quick to strike back then, imposing tariffs on a similar amount of US goods.
Beijing’s economic ministry spokesman, Gao Feng, repeated threats that it would retaliate if a new round of tariffs was imposed: “If the United States, regardless of opposition, adopts any new tariff measures, China will be forced to roll out necessary retaliatory measures.”
The consultation period on the new tariffs ends on Thursday, which means Donald Trump could sign off on them imminently. The first wave of US tariffs mainly affected aerospace, IT and medical equipment. The second wave would affect 6,000 more Chinese products imported into the US, including many metals and chemicals, but also everyday consumer goods such as toilet paper, deodorants, shampoo, furniture, meat and fish. Also on the list are more unusual items such as badger hair for shaving brushes, shark fins, eels and portable forges.
In August, China outlined plans for its retaliatory measures, with dutieson $60bn of goods. Levies would be imposed on more than 5,000 goods imported from the US, including aircraft, soya bean oil, smoked beef, coffee and flour.
Craig Erlam, a senior market analyst at the foreign exchange platform Oanda, said new US tariffs would be a major escalation by Trump in the US-China dispute. “This would represent a significant ramping up of the trade war between the world’s two largest economies and show the US electorate ahead of the mid-term [elections] that he will not shy away from his strategy, regardless of the warnings against doing so.”
China imported $129bn of goods from the US last year, while exporting about $500bn, so Beijing cannot match Trump’s $200bn threat in full.
This week it emerged the US trade deficit – the gap between imports and exports – widened by more than $4bn to $50.1bn in July, as the trade gap with China hit another record high. The deficit with the EU also rose to a record high.
Mounting global trade tensions have been weighing on global markets. Emerging markets stocks and currencies were hit by heavy sell-offs in recent days, pressured by the strengthening US dollar – seen as a safe currency to buy in times of trouble – and also boosted by the prospect of higher US interest rates. There are worries that other countries could follow Argentina and Turkey into financial crisis, while South Africa has entered into recession.
Some emerging markets currencies staged a small recovery on Thursday, including the Argentinian peso, which hit a record low on Monday, the South African rand and the Mexican peso. The Indian rupee dropped to a new all-time low, falling to 72.095 against the dollar.