(Bloomberg) -- China said it would counter U.S. protectionism "to the end, and at any cost," as a war of words over President Donald Trump’s proposed tariffs on Chinese imports escalated.
The statement from Beijing came after Trump ordered his administration to consider tariffs on an additional $100 billion in Chinese goods on Thursday, sending U.S. stock futures tumbling. The U.S. president cited “China’s unfair retaliation” in response to his list of proposed tariffs earlier this week covering $50 billion in Chinese products.
"The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people,” the Commerce Ministry said in a statement on its website on Friday.
Trump cited dropping aluminum prices as proof his get-tough trade policies are working in a Twitter message Friday morning. "Despite the Aluminum Tariffs, Aluminum prices are DOWN 4%. People are surprised, I’m not! Lots of money coming into U.S. coffers and Jobs, Jobs, Jobs!" he said in a posting.
Trump’s unexpected move threatens to unravel efforts by top U.S. and Chinese trade officials to lower the heat and reach an agreement that could stave off an escalating conflict. Administration officials have spent the past two days trying to tamp down fears of a trade war, with chief economic adviser Larry Kudlow saying Thursday the U.S. could still hammer out a deal with Beijing.
Trump said U.S. Trade Representative Robert Lighthizer would identify which new products may be subject to tariffs. He later stressed that any additional tariffs first would be subject to a 60-day public comment period.
“No tariffs will go into effect until the respective process is complete,” Lighthizer said in a statement. The administration hasn’t said when any of the proposed tariffs would go into force.
Trump struck a defiant tone during a speech in West Virginia on Thursday, saying it was time to stop China from “taking advantage” of America.
“You have to go after the people who aren’t treating you right,” Trump said. “We’re going to have a fantastic relationship long term with China, but we have to get this straightened out. We have to have some balance.”
What Bloomberg Economists Say...
The Trump threat “raises the possibility of an alarming escalation in the trade conflict between the world’s two biggest economies,” Tom Orlik, Bloomberg Economics chief economist, wrote in a note. “It’s difficult to tell the difference between a rhetorical flourish from a president known for bombastic remarks and a meaningful shift in policy.”
Trump’s moves are reverberating beyond U.S.-China ties. Beijing has called on the European Union to help it reject U.S. protectionism and uphold the international trade order. South Korea on Friday threatened tariffs on imports from the U.S. in retaliation for imposing safeguard duties on washing machines and solar panels.
Both Trump and Xi have to weigh the political costs of a trade war. China’s proposed tariffs on agricultural goods would hit U.S. farmers hard at a time they are already dealing with depressed crop prices and stagnant values for their land. Worries about a potential trade war have rippled through farm states, which are a powerful voting bloc in November’s congressional elections.
For Xi, the need to look strong in the face of U.S. threats outweighs any immediate hit to economic growth, according to David Zweig, a political science professor at the Hong Kong University of Science and Technology.
“Of course there is a breaking point, but it would have to take very deep pain and several years of it,” he said when asked about China’s ability to withstand economic pain. “Concessions are more dangerous to Xi than a loss of the U.S. export market, at least in the medium term.”
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