China vows to ‘fight to the end’ over US tariffs threat
Joe Cash |
China has vowed to “fight to the end” if US President Donald Trump follows through on a threatened 50 per cent tariff hike, rejecting calls to drop its countermeasures and setting the stage for a high-stakes standoff between the world’s top two economies.
If neither side blinks and Trump sticks to his plans, total new levies could climb to 104 per cent this year on Chinese goods imported into the United States, escalating a trade war that has already spurred the biggest market losses since the pandemic.
But with Trump’s previous tariff increases already squeezing Chinese exporters’ margins to the point of suffocation, further hikes would only serve to underscore Washington’s appetite for brinkmanship and its desire to cut China out of the world’s biggest consumer market as a matter of principle, analysts say.
“The US side’s threat to escalate tariffs against China is a mistake on top of a mistake, once again exposing the American side’s blackmailing nature,” China’s commerce ministry said in a statement on Tuesday.
“If the US insists on having its way, China will fight to the end.”
Trump said he would impose the additional 50 per cent duty on US imports from China on Wednesday if Beijing did not withdraw the 34 per cent tariffs it had imposed on US products last week.
Those Chinese tariffs, in turn, had come in response to 34 per cent “reciprocal” duties announced by Trump.
The average US tariff on Chinese goods is already set to climb to 76 per cent following Trump’s levies last week, which hit China with a tariff of 34 per cent, in addition to 20 per cent he previously imposed this year.
“If the tariffs keep going up and up, it becomes a battle of wills and principles rather than economics,” said Xu Tianchen, senior economist for China at the Economist Intelligence Unit.
“Since China already faces a tariff rate in excess of 60 per cent, it doesn’t matter if it goes up by 50 per cent or 500 per cent,” he added.
The moves have led economists to question whether the White House stands to gain much from hiking rates further.
China has stepped up efforts to shield its economy from global market turmoil following Trump’s “Liberation Day” announcement, with several state holding companies committing to increase share investment, a slew of listed companies announcing buybacks, and the central bank pledging liquidity support for fund Central Huijin after it intervened to support sinking stocks.
But there is no shying away from the fact that Trump’s affinity for tariffs risks de-railing the largely export-led economic recovery that has been underway in China since the end of the COVID pandemic, unless exporters can pivot quickly to other markets.
“Once its passed the 35 per cent mark, the tariffs actually already wipe out the entire profit of the export sector,” said Dan Wang, director, China, at Eurasia Group.
“After that, China shouldn’t export to the US at all. It could be 1000 per cent, but since there is no trade, there is no harm.”
“Europe is and will be the most profitable market for China now,” she added.
President Xi Jinping is expected to meet Spain’s Prime Minister on Friday, with finding a resolution to trade tensions between Beijing and Brussels over China’s electric vehicle exports likely on the agenda, along with Trump’s broader tariff onslaught.
The Chinese leader will then visit Malaysia, Vietnam and Cambodia, three economies that gained from Chinese manufacturers relocating to avoid US sanctions during Trump’s first term but which now face steep levies of their own.
Reuters
