Source: Global Times Published: 2019-5-14
China's latest countermeasures against US tariff hikes demonstrated its "rational" attitude toward the ongoing trade war as the retaliation left room for further negotiations while also easing pressure on domestic companies, experts said on Tuesday.
On Monday, China announced it will increase tariffs on a total of 5,140 American products from June 1, after the US raised duties on $200 billion worth of Chinese imports to 25 percent from 10 percent on Friday.
The tariff rates released by China were divided into four categories, as the country decided to impose 25 percent tariffs on 2,493 US goods like meat, wheat, wine, wireless earphones and liquefied natural gas (LNG) and 20 percent duties on 1,078 products from the US including chemicals, sugar and paper.
Another 974 kinds of goods including US-made wigs and textiles will be subject to a 10 percent tariff. For items that were previously subject to a 5 percent tariff, the rate will remain unchanged.
Hours after US President Donald Trump announced the tariffs on $200 billion worth of Chinese goods in September 2018, China responded with planned levies on $60 billion worth of duties on 5,207 US products, which will be subject to tariff rates of 10 percent or 5 percent.
In the latest list, China said that it will increase tariffs from 10 percent to 25 percent on US items such as LNG. "To confront the US' repeated tariff threats since last year, China had no choice but fight back," said Dong Yan, a research fellow at the Chinese Academy of Social Sciences.
But experts said that China's countermeasures, unlike the US' one-size-fits-all move of raising tariffs from 10 percent to 25 percent, were based on principles and showed the country's rational attitude toward its trade row with the US.
"The US will feel more pressure than it expected as it's not hard for China to find replacements for products like LNG in other markets, while the US will lose such a big market in China," said Zhuang Rui, deputy dean of the University of International Business and Economics' Institute of International Economics in Beijing.
As to China's efforts to maintain a 5 percent tariff rate on certain products and exempt certain eligible products from the list announced on Monday, Zhuang said that policy would restrain cost hikes for Chinese companies and offset their pressure caused by the US duty hikes.
Cited by industry insiders as "precision strikes," China's retaliation came less than 90 minutes before the US stocks started trading on Monday, leaving the S&P 500 index down 2.41 percent and off 4.6 percent in the month to date, and the Dow Jones Industrial Average lost 2.38 percent.
On Monday, the Office of the US Trade Representative announced a list of 3,805 product categories that could be subject to possible US tariffs on about $300 billion of Chinese imports, including computers, cellphones, meat, watches, infant formula and fireworks, according to media reports.
A public hearing will be held on June 17 on the list that could be subject to tariffs of up to 25 percent.
"Imposing tariffs will not solve any problems and initiating a trade war will harm others and itself. China does not want a trade war but is not afraid of it," Geng Shuang, a spokesperson for the Chinese Foreign Ministry, told a press briefing on Monday, responding to US threats of a $300 billion target list of Chinese goods.
"We will not succumb to any external pressure and have the determination and ability to safeguard our legitimate rights and interests," Geng noted.
The US new tariff threat is a "huge mistake" that will cause "big damage" to China-US economic and trade relations since the countries established diplomatic relations in 1972, Zhuang said. It will also harm the domestic and global reputation of Trump's administration because the outcome of the US' repeated tariff hikes will become burdens to US consumers and increase their living costs, Zhuang noted.
"The US dependence on China-made goods is larger than China's dependence on American products," said He Weiwen, a former senior Chinese trade official.
Thus, the tariffs will make US trade further slide, and that will have been caused by the US itself, said He.
Bilateral trade dropped significantly in the first four months, declining to 1.1 trillion yuan ($173 billion) or 11.2 percent year-on-year, according to China's official data.
Future talks expected
"Tariffs are the US method for bargaining [for more interests], but trade talks are the ultimate way for the two countries to seek a balance of interests and address related problems," Dong noted.
China and the US concluded their 11th round of high-level negotiations in Washington on Friday without reaching any deal. There were no plans for future talks as of press time on Tuesday.
The trade war will harm both countries, Dong said, noting that China-US trade talks would continue, but "it's possible Trump will ask for more."
He Weiwen is a senior fellow of Chongyang Institute for Financial Studies, Renmin University of China.