Thursday, 21 February, 2019

Trump's $200 billion China threat wobbles European, hurts Asian stocks

Nellie Chapman | 18 September, 2018, 07:12

The Trump administration is set to announce additional tariffs on Chinese goods worth some two-hundred billion US dollars.

Earlier Monday, White House economic adviser Larry Kudlow told the Economic Club of NY that the "ready to negotiate and talk with China any time that they are ready for serious and substantive negotiations towards free trade to reduce tariffs and non-tariff barriers, to open markets, to allow the most competitive economy in the world, ours, to export more and more goods and services to China".

The White House also said the United States was prepared to "immediately" place tariffs on another $267 billion worth of imports "if China takes retaliatory action against our farmers or other industries".

The Trump administration has demanded that China cut its $375 billion trade surplus with the United States, end policies aimed at acquiring US technologies and intellectual property and roll back high-tech industrial subsidies.

"But, so far, China has been unwilling to change its practices", he said.

These practices plainly constitute a grave threat to the long-term health and prosperity of the United States economy, he added.

Michigan Governor Rick Snyder, known as a moderate Republican and a former computer executive, told Reuters on a trip to China that the anxiety and uncertainty around tariffs risked limiting Chinese investment in the United States.

It would be devastating to the New Zealand economy if it faced increased tariffs on some of its big exports to the U.S., he said.

Trump said China had refused to change the unfair practices that hurt United States businesses and workers.

The green light for the tariffs initially dragged US stocks lower, fueling drops in the Chinese yuan in offshore trading and gains in the dollar index.

The U.S. Treasury had invited Chinese officials, including President Xi Jinping's top economic adviser, to attend talks in Washington this week.

The Wall Street Journal reports, the measures could be announced as early as Monday.

In a statement Monday, $200 billion in additional tariffs were announced and will go into effect September 24.

At the moment it seems uncertain how much longer current trade tension will continue, but it seems that it has undoubtedly slowed down in comparison to the prior few months as both parties seem to now at least be seriously looking to a resolution to the current trade battles.

When negotiating with other countries, the U.S. should be pursuing rules agreeable to both the USA and its trading partners, in order to maximise economic value and productivity, said Barshefsky, who served from 1997 to 2001.

Adding in the $200 billion list and another $267 billion of Chinese goods, total imports from China facing tariffs would exceed the $505 billion in goods that the United States imported from China previous year. According to these experts, a large USA trade deficit with China means that America is a wealthy country and American consumers can afford the most up-to-date devices. And in a victory for Apple Inc. and its American customers, the administration removed smart watches and some other consumer electronics products from the list of goods to be targeted by the new tariffs.

Chinese officials are likely already tired of entering negotiations with Mnuchin, after a truce he supposedly brokered with Liu in May was publicly undermined by Trump.

The dollar's weakening is a good sign for global markets, especially in emerging markets where the strong dollar has been a cause for concern, Nuveen's Nick said.

Such a move, the official said, is not an effort to constrain China.