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US hikes tariffs on Chinese goods, Beijing retaliates

President Donald Trump’s administration again hiked tariff on Chinese goods, effective from May 10, 2019, much to the dismay of China which said it would retaliate. The negotiators from China and the US met On May 09, 2019 and the U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin briefed President Trump on the negotiations, before dining with the Chinese negotiators. The Chinese delegation was led by Vice Premier Liu He,.who asserted that he “came with sincerity.” He appealed to Washington to avoid more tariff hikes, saying they are “not a solution” and would harm the world.“We should not hurt innocent people. But all these gestures were of no avail and negotiations could not settle the issue.

Us Slaps another tariff hike on China

Another bout of tariff hike has escalated trade war between the two countries. The US is bothered about its highly skewed and adverse balance of payments, lack of market access provided to US products in Chinese markets and a concern against China’s technology ambitions efforts to become a world power.  The Trump administration raised duties on $200 billion of Chinese imports from 10% to 25%. China’s Commerce Ministry said would take “necessary countermeasures” but gave no details. This a matter of concern for the global economy as the trade war between the countries has disrupted billions of dollars in trade and shaken global financial markets. This hike in tariffs took place while the Chinese authorities tried to negotiate with the US. American officials accuse Beijing of backtracking on commitments made in earlier rounds of negotiations.

China retaliates as the trade battle goes ahead

The latest increase extends 25% U.S. duties to a total of $250 billion of Chinese imports. The US President later said he might extend penalties to all Chinese goods shipped to the United States. The latest higher U.S. import taxes don’t apply to Chinese goods shipped before May 10, 2019. By sea, shipments across the Pacific take about three weeks, which gives negotiators a few more days to reach a settlement before importers may have to pay the increased charges.

Beijing had set additional rates of 5% and 10% on 5,207 U.S. products worth $60 billion in September, in response to the U.S.’s initial 10% duty on the $200 billion worth of Chinese goods, and warned at the time that it would counter any higher tariffs imposed by Washington. It is notable that Beijing has so far retaliated for previous tariff hikes by raising duties on $110 billion of American imports before the latest retaliation. It is reported that Chinese regulators are running out of U.S. goods for penalties due to the lopsided trade balance. Chinese officials have targeted operations of American companies in China by slowing customs clearance for their goods and stepping up regulatory scrutiny that can hamper operations.

China didn’t want to escalate the trade war with the US. But when the US proceeded with its latest move of tariff hike against the Chinese products, China retaliated three days after. On May 13, 2019 China retaliated saying it would impose higher tariffs on most U.S. imports on a revised $60 billion target list, indicating further escalation of a bitter trade war. A total of 5,140 U.S. products will be subject to additional tariffs of 5%, 10%, 20% and 25% starting June 1, the finance ministry in Beijing said in a statement. The escalation, from rates of 5% and 10%, was announced hours after Trump warned China not to retaliate against the latest U.S. tariffs hike. The additional tariff of 25% will be levied against 2,493 goods including liquefied natural gas, soy oil, peanut oil, petrochemicals, frozen vegetables and cosmetics, the ministry said, and of 20% on 1,078 products.

Way ahead- No early signs of reconciliation?

China reiterated that its adjustment on additional tariffs is a response to U.S. unilateralism and protectionism,” the ministry said. “China hopes the U.S. will get back to the right track of bilateral trade and economic consultations and meet with China halfway.” The two countries are sparring over U.S. allegations that China steals technology and pressures American companies into handing over trade secrets, part of an aggressive campaign to turn Chinese companies into world leaders in robotics, electric cars and other advanced industries. The latest Chinese retaliation came as U.S. President Donald Trump signaled his intent to slap tariffs on all Chinese imports if Beijing does not give in, suggesting a prolonged standoff between the world’s two largest economies that could roil global markets for weeks or months to come. It does not seem that the two countries are inclined to resolve their problems by accommodation and understanding. China is a rising global power driving its power from its deep pocket resulting from trade surplus with its most of the big trade partners. The economies like the US feel that their technology and manufacturing jobs have been stolen by China which is indulging in exchange rate manipulation, patent violations, theft of technology and reverse technological innovation, all of which are eroding America’s comparative advantage. The battle does not show any sign to relent in immediate terms.

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