China hits back

China hits back with tariffs on $60B in U.S. goods

By ADAM BEHSUDI and DOUG PALMER

China announced on Friday it would hit about $60 billion worth of U.S. exports with new tariffs in response to President Donald Trump’s decision this week to escalate potential trade penalties on Beijing.

China’s Ministry of Commerce said it would impose the tariffs at four different tax rates. The statement said the tariffs would be implemented subject to U.S. action.

China said it was taking the action “because the U.S. side has repeatedly escalated the situation despite the interests of both enterprises and consumers,” according to an informal translation. “China has to take necessary counter-measures to defend the country's dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries in the world.“

The Trump administration on Wednesday announced it would consider increasing proposed tariffs on $200 billion worth of Chinese goods from the 10 percent rate it initially proposed to 25 percent. A comment period on those potential duties will close on Sept. 5 and, shortly after that, the president will be in a position to impose those tariffs.

U.S. Trade Representative Robert Lighthizer said the possible increase in rate “is intended to provide the Administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets and prosperity for all of our citizens.“

China’s Ministry of Finance said the tariffs will be at rates of 5 percent, 10 percent, 20 percent and 25 percent and target more than 5,200 individual types of U.S. exports to China. The lists were published on its website.

China is proposing that nearly half of the targeted U.S. goods be hit with a 25 percent tariff.

In its announcement Friday, China’s Commerce Ministry called its countermeasures “rational and restrained.”

“Any unilateral threat or blackmail will only lead to intensification of conflicts and damage to the interests of all parties,” a ministry spokesman said in a statement.

The news of China’s potential retaliation comes the same day as the release of Commerce Department numbers showing that the U.S. goods trade deficit with China rose again in June and remains on track to match or surpass the record of $375 billion set in 2017, despite Trump's attempts to rein it in.

The monthly trade gap, which measures how much U.S. imports exceed U.S. exports, totaled $33.5 billion for China in June, up slightly from $32.6 billion from May. For the first six months of the year, the goods trade deficit with China was $186 billion, up nearly 9 percent from the $171 billion gap during the same period in 2017.

The overall trade deficit in both goods and services also increased in June to $46.3 billion, a jump of more than 7 percent from the May tally. At the current pace, the overall trade deficit will rise for the second consecutive year under Trump, surpassing last year's level of $552 billion.

The trade deficit — both with China individually and the rest of the world— has been a particular focus of the president, who views the data as evidence of a massive transfer of wealth to other countries as a result of bad trade deals and unfair foreign policies.

However, most economists attribute the gap to macroeconomic factors, such as low savings and high consumption rates in the United States. The trade gap also often increases when U.S. economic growth is strong.

China has retaliated in kind to Trump's initial tariffs and has promised to respond accordingly to future Trump actions.

Trump has already imposed a 25 percent tariff on more than $34 billion worth of Chinese goods to put pressure on Chinese leaders to change policies he believes have hurt the United States. He is poised to hit another $16 billion of Chinese goods with a 25 percent duty in coming weeks.

Last week, Lighthizer, in the face of tough questioning from senators, said strong action was needed to trim the bilateral trade deficit with China from the record level set in 2017.

"These are numbers — $375 billion in goods deficits, and I repeat not as a result of economic forces — those are numbers that are not sustainable, never even heard of in the history of the world. These are such cataclysmic numbers that something has to be changed," he told a Senate Appropriations subcommittee.

Still, the entire U.S. trade deficit, including China and all other countries, totaled just 2.8 percent of the U.S. gross domestic product of $19.5 trillion in 2017, down sharply from a peak of 5.5 percent in 2006, when GDP was $13 trillion.

The U.S. economy is forecast to grow to more than $20 trillion in 2018, so even if the overall goods and services trade deficit rises slightly this year, it should remain well below peak levels as a percentage of GDP.

The wider trade gap in June, compared to May, reflected a slight drop in exports and a slight rise in imports. Higher oil prices helped drive the import tally higher, the Commerce Department report showed.