Trade row deepens as China ups tariffs on $60B in US goods

BEIJING-The Associated Press

Deepening a trade battle and sending financial markets into a tailspin, China announced on May 13 it was raising tariffs on $60 billion of U.S. goods in retaliation for the latest hike in U.S. tariffs on its exports.

The Finance Ministry said on May 13 the new penalty duties of 5% to 25% on hundreds of U.S. products including batteries, spinach and coffee will take effect June 1.

That followed U.S. President Donald Trump's increase on May 10 of duties on $200 billion of Chinese imports from 10% to 25% after charging that China had backtracked on commitments it made in earlier negotiations in a dispute over Beijing's technology ambitions and perennial trade surplus.

Resuming his messages over Twitter early May 13, Trump warned Chinese President Xi Jinping that China "will be hurt very badly" if it doesn't agree to a trade deal.

Trump insisted the tariffs the U.S. has placed on Chinese goods don't hurt American consumers, saying there is "no reason for the U.S. Consumer to pay the Tariffs."

White House economic adviser Larry Kudlow acknowledged on May 12 that U.S. consumers and businesses pay the tariffs. "Both sides will pay," he told Fox News.

China had vowed "necessary countermeasures" on May 10 against Trump's escalation of the tariff conflict.

Beijing is running out of U.S. imports for penalties due to the lopsided trade balance between the world's two largest economies. Regulators have targeted American companies in China by slowing down customs clearance for shipments and processing of business licenses.

The new tariffs are likely to hurt exporters on both sides, as well as European and Asian companies that trade between the United States and China or supply components and raw materials to their manufacturers.

The increases already in place have disrupted trade in goods from soybeans to medical equipment and sent shockwaves through other Asian economies that supply Chinese factories.

Forecasters have warned that the U.S. tariff hikes could disrupt a Chinese recovery that had appeared to be gaining traction. Growth in the world's second-largest economy held steady at 6.4% over a year earlier in January-March, supported by higher government spending and bank lending.

The tensions "raise fresh doubts about this recovery path," Morgan Stanley economists Robin Xing, Jenny Zheng and Zhipeng Cai said in a report.

The latest U.S. charges could knock 0.5 percentage points off annual Chinese economic growth and that loss could widen to 1 percentage point if both sides extend penalties to all of each other's exports, economists say. That would pull annual growth below 6%, raising the risk of politically dangerous job losses.

The latest talks ended with no word of progress on May 10.

Trump might meet his Chinese counterpart, Xi Jinping, during next month's meeting of the G20 major economies in Osaka, said Kudlow, his economic adviser.

Chinese officials have invited the top U.S. envoys - Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin -to Beijing, Kudlow said on Fox News. But he said there were no "definite plans."

Trump started raising tariffs last July over complaints China steals or pressures companies to hand over technology.

Washington wants Beijing to roll back government support for Chinese companies striving to become global leaders in robotics and other technology. The U.S. and other trading partners say such efforts violate Beijing's free-trade commitments.

A stumbling block has been U.S. insistence on an enforcement mechanism with penalties to ensure Beijing carries out its commitments. Economists say Chinese leaders probably reject that as a violation of Chinese sovereignty.