China dashed prospects for a near-term resolution to the trade war with the U.S., warning President Donald Trump his threats of further tariffs are blocking any potential negotiations.
The response, which came just over an hour after the U.S. imposed new duties on USD200 billion in Chinese goods yesterday, underscores a deepening gulf between both governments in a dispute that observers say is less about a row over a bilateral goods deficit and increasingly about a U.S. desire to put the brakes on China’s economic ascent.
Trump has repeatedly threatened higher tariffs on the remaining Chinese imports should Beijing retaliate against the latest round. As China has said that step is certain, the stage appears set for yet another escalation of the trade war. China canceled talks that were scheduled for this week, and is digging in by prepping stimulus measures to cushion the economy.
“The door for trade talks is always open but negotiations must be held in an environment of mutual respect,” according to a white paper carried by the state-run Xinhua News Agency. Negotiations “cannot be carried out under the threat of tariffs.”
Whichever side is right, the hardening rhetoric is increasingly giving way to actions that are hurting the world economy, Fitch Ratings said in its latest global outlook.
“The trade war is now a reality,” Fitch chief economist Brian Coulton said in the release. The ratings firm downgraded its world growth forecast for 2019 by 0.1 percentage point to 3.1 percent and warned of further downside risks.
Hong Kong stocks fell, while volumes across Asia were thinner than average due to holidays in the largest markets, China and Japan. The latest round of U.S. duties took effect just after midnight Washington time yesterday (midday in Beijing) on a list of products ranging from frozen meat to television components. China is poised to retaliate with tariffs on USD60 billion in U.S. goods, a move that Trump has said would spur new duties on another $267 billion in Chinese imports.
In announcing the rates for the retaliatory duties last week, the government in Beijing said the tariffs would be effective as of 12:01 p.m. local time on Sept. 24.
If the president follows through on the escalation threat, U.S. tariffs would cover all goods the nation imported from China last year, risking an escalating conflict that could upend the supply chains of multinational companies.
China on Saturday called off planned trade talks with U.S. officials with a move by the U.S. State Department to sanction China’s defense agency and its director on Thursday contributing to the decision, according to people familiar with the situation. There’s a growing consensus in Beijing that substantive talks will only be possible after U.S. mid-term elections in November, the people said.
Efforts at diplomacy have failed, with no breakthroughs since high-
level talks began in May. Trump has warned that the 10 percent tariffs on $200 billion in Chinese goods will rise to 25 percent in January if Beijing refuses to offer concessions.
Still, the U.S. remains open to talks, Lindsay Walters, deputy White House press secretary, said in an emailed statement.
“President Trump has an excellent relationship with President Xi and our teams have been in frequent communication since President Trump took office,” Walters said. “We remain open to continuing discussions with China, but China must meaningfully engage on the unfair trading practices.”
Neither side has backed down since the tit-for-tat tariff war began in July when the U.S. imposed duties on $34 billion of Chinese goods. Another $16 billion of goods were included in August and China retaliated in kind to both moves.
Companies complain that the time frame between the announcement of the latest levies and implementation of the tariffs on thousands of products is too short. A protracted trade war will fuel inflation in the U.S., particularly as tariffs are added to categories such as furniture, apparel and technology, according to analysts at Bloomberg Intelligence.
Here’s Where Tariffs on $260 Billion of Goods Are Biting in U.S.
“Retailers are already facing a tidal wave of tariffs. This latest tranche is a tsunami,” said Hun Quach, vice president of international trade for the Retail Industry Leaders Association. “With thousands of consumer products included, little warning, and no time to prepare, businesses are left scrambling.”
Beijing’s latest tariffs include an additional 5 percent duty on about 1,600 kinds of U.S. products including computers and textiles and an extra 10 percent on more than 3,500 items including chemicals, meat, wheat, wine and liquefied natural gas.
Asked this month if Beijing’s planned retaliation was a guarantee that Trump would go ahead with the next round of duties, White House trade adviser Peter Navarro said on NPR’s Morning Edition that “the president was crystal clear in his statement: if China retaliates, the process will move forward on the additional amount.”
Edward Alden, senior fellow at the Council on Foreign Relations, said there was a chance the trade war could spiral out of control but that there is “a window for serious negotiation.”
“The Trump administration must get its position straight though – what does it want from China, and who is empowered as a negotiator by President Trump to bring the deal home? Unless that happens, serious negotiations will be impossible and the likelihood of continued escalation increases,” Alden said. Bloomberg
World shares fall on reports China-US trade talks put off
Shares have fallen in Asia and Europe after China reportedly rebuffed a plan for talks with the U.S. on resolving their dispute over trade and technology.
THE DAY IN ASIA: Hong Kong’s Hang Seng index fell 1.6 percent to 27,499.39 and Australia’s S&P ASX 200 edged 0.1 percent lower to 6,186.90. India’s Sensex gave up 1.5 percent to 36,296.80. Shares rose in Singapore but fell in Thailand and Indonesia. Markets in Japan, South Korea, Shanghai and elsewhere in the region were closed for national holidays.
CHINA-US-TRADE: China and the U.S. pressed ahead with another tariff hike on each other’s products. There was no sign that proposed trade talks between Washington and Beijing would go ahead.
KEEPING SCORE: Germany’s DAX fell 0.4 percent to 12,382.50 and the CAC 40 in France lost 0.3 percent to 5,479.86. The FTSE 100 in Britain lost 0.2 percent to 7,472.33. The futures contracts for the Dow Jones industrial average and the S&P 500 both fell 0.2 percent, auguring a slow start on Wall Street.
ANALYST’S VIEWPOINT: “The weekend headlines have not been a blessing for ‘risk sentiment,’” Stephen Innes of OANDA said in a commentary. He added, “the optimist in me is siding on ‘this too shall pass,’ but with markets closed in Japan, China and South Korea as a large part of Asia celebrates the Mid-Autumn festival, it impossible to gauge sentiment in these drastically diminished liquidity conditions.”
WALL STREET: Wall Street capped a milestone-setting week Friday with a mixed finish for the major U.S. stock indexes and the second all-time high in two days for the Dow Jones Industrial Average. The S&P 500 index dropped 1.08 points on Friday to 2,929.67, just under its latest all-time high set a day earlier. The Dow gained 0.3 percent to 26,743.50, thanks largely to gains in Boeing and McDonald’s. The Nasdaq composite lost 0.5 percent, to 7,986.96. The Russell 2000 index of smaller companies gave up 0.5 percent to 1,712.32.
ENERGY: Benchmark U.S. crude picked up USD1.48 cents to $72.26 per barrel in electronic trading on the New York Mercantile Exchange. It gained 0.7 percent to settle at $70.78 a barrel Friday in New York. Brent crude, used to price international oils, added $1.96 to $80.20 per barrel.
CURRENCIES: The dollar rose to 112.66 yen from Friday’s 112.60 yen. The euro climbed to $1.1770 from $1.1752. The British pound rose to $1.3124 from $1.3072. MDT/AP
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