China hits back as US opens second trade-war front

China hits back as US opens second trade-war front

Shipping containers await handling at the Yangshan Deep Water Port in Shanghai. (Bloomberg Photo)
Shipping containers await handling at the Yangshan Deep Water Port in Shanghai. (Bloomberg Photo)

BEIJING: China has announced a $3-billion list of US goods for possible retaliation in a tariff dispute with US President Donald Trump and is bracing for a bigger battle over technology policy as financial markets sank on fears of global disruption.

The Commerce Ministry in Beijing said higher duties on American pork, wine, apples, steel pipe and other goods would offset Chinese losses due to Trump's tariff hike on steel and aluminium imports. It urged Washington to negotiate a settlement but set no deadline.

In a separate and potentially bigger dispute, the ministry criticised Trump's decision on Thursday to approve a possible tariff hike on Chinese imports worth up to $60 billion over Beijing's technology policies. It gave no indication of a possible response but a foreign ministry spokeswoman said Beijing was "fully prepared to defend" its interests.

"We don't want a trade war, but we are not afraid of it," said the spokeswoman, Hua Chunying.

Financial markets sank on concern the escalating tensions might disrupt the biggest global trading relationship or lead other nations to raise import barriers.

Tokyo's benchmark tumbled by an unusually large 5.1% while the Shanghai Composite Index closed down 3.4%.

The dollar dipped to 104.90 yen as investors shifted into the Japanese currency, which is viewed as a "safe haven" from risk.

The United States, meanwhile, has launched a challenge at the World Trade Organization against China over intellectual property breaches, a statement said.

"The United States is taking action at the World Trade Organization to address China's unfair technology practices that run counter to WTO rules," the statement from the US Trade Representative's office said.

Trump said it was time to strike back against the "theft" of American intellectual property. He also said he intended to pursue dispute settlement in the WTO to confront China over policies that result in unfair treatment for US companies and innovators trying to do business in China.

"China appears to be breaking WTO rules by denying foreign patent holders, including US companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends," said the USTR in its statement.

It said China also appears to be breaking WTO rules by imposing contract terms that discriminate against and are less favourable for imported foreign technology.

Trump's technology order is in response to "unfair and harmful acquisition of US technology" said a statement by the USTR.

Possible measures include a 25% tariff on Chinese-made aerospace, computer and IT and machinery products but gave no details.

China's response on Friday appeared to be aimed at increasing domestic US pressure on Trump by making clear which exporters, including farm areas that voted for him in 2016, might be hurt.

"Beijing is extending an olive branch and urging the US to resolve trade disputes through dialogue rather than tariffs," said economist Vishnu Varathan of Mizuho Bank. "Nevertheless, the first volley of shots and retaliatory response has been set off."

The list announced Friday was linked to Trump's steel and aluminium tariffs, but companies already were looking ahead to a battle over complaints that Beijing steals or forces companies to hand over technology.

The tensions reflect the duelling nationalistic ambitions of Trump and his Chinese counterpart, Xi Jinping.

US efforts to boost exports of technology-based goods, begun under Trump's predecessor, Barack Obama, conflict with China's plan for state-led development of global competitors in fields from robotics to electric cars. Foreign business groups complain Chinese regulators are trying to squeeze them out of promising industries.

The Commerce Ministry announcement Friday made no mention of jetliners, soybeans or other products that are the biggest US exports to China by value. That leaves Beijing room to take more drastic steps.

Chinese officials are trying to figure out how to address US concerns, said Jake Parker, vice-president for China operations of the US-China Business Council, which represents American companies that do business with China.

"Until the Trump administration articulates those concerns and how China can address them, it's going to be very, very difficult for China to make those changes," said Parker.

Washington doesn't believe it needs to give Chinese leaders another list of requests because they already know what the United States wants, said a senior US official. He said Trump and Xi agreed last year on a 100-day agenda of trade-liberalisation measures but Beijing failed to act on about half of them.

Instead, the Trump administration wants Chinese leaders to address more basic structural issues that interfere with market forces, said the official.

The latest proposed Chinese tariffs would add a 25% charge on pork and aluminium scrap, mirroring Trump's 25% duty on steel, according to the Commerce Ministry. A second list of goods including wine, apples, ethanol and stainless steel pipe would be charged 15%, the same margin as Trump's tariff hike on aluminium.

Chinese purchases of those goods last year totalled $3 billion, the ministry said.

Beijing reported a trade surplus of $275.8 billion with the United States last year, or two-thirds of its global total. Washington reports different figures that put the gap at a record $375.2 billion.

The White House, meanwhile, has given the European Union, Argentina, Australia, Brazil, Canada, Mexico, and South Korea, until May 1 to negotiate levies on steel and aluminium. The administration said the suspensions can be renewed or revoked then, “pending discussions of satisfactory long-term alternative means to address the threatened impairment to US national security.”

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