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China vows retaliation if Trump slaps 25 percent tariff on $200 billion of Chinese imports

[August 01, 2018] By Ben Blanchard and Steve Holland

BEIJING/WASHINGTON (Reuters) - China said on Wednesday that "blackmail" wouldn't work and that it would hit back if the United States takes further steps hindering trade, as the Trump administration considers slapping a 25 percent tariff on $200 billion worth of Chinese goods.

The proposal would increase the potential tariff rate from 10 percent the administration had initially put forward on July 10 for that wave of duties in a bid to pressure Beijing into making trade concessions, a source familiar with the plan said on Tuesday.

The tariffs target thousands of Chinese imports, including food products, chemicals, steel and aluminum and consumer goods ranging from dog food, furniture and carpets to car tires, bicycles, and baseball gloves and beauty products.

While the duties would not be imposed until after a period of public comment, raising the proposed level to 25 percent would escalate the already bitter trade dispute between the world's two biggest economies.

The source said President Donald Trump's administration could announce the tougher proposal as early as Wednesday in Washington. The plan to more than double the tariff rate was first reported by Bloomberg News.

China, which has accused the United States of bullying, again vowed to retaliate if Trump proceeds with the measures, warning that pressure tactics would fail.

"U.S. pressure and blackmail won't have an effect. If the United States takes further escalatory steps, China will inevitably take countermeasures and we will resolutely protect our legitimate rights," Chinese Foreign Ministry spokesman Geng Shuang told a regular news briefing.

Investors fear an escalating trade war between Washington and Beijing could hit global growth, and prominent U.S. business groups, while weary of what they see as China's mercantilist trade practices, have condemned Trump's aggressive tariffs.

Representatives of U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have been speaking privately as they seek to restart negotiations to defuse the budding trade war, Bloomberg reported, citing sources.

A spokeswoman for the U.S. Trade Representative's Office declined to comment on the proposed tariff rate increase or on whether any changes would alter the deadlines laid out for comment period before implementation.

Asked about communication between the two countries on the dispute, Geng said China had "always upheld using dialogue and consultations to handle trade frictions", but that dialogue must be based on mutual respect and equality.

"Unilateral threats and pressure will only produce the opposite of the desired result," Geng said.

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Shipping containers are seen on a cargo vessel at the Dachan Bay Terminals in Shenzhen, Guangdong province, China July 12, 2018. REUTERS/Stringer

"AMERICANS' POCKETBOOKS"

In early July, the U.S. government imposed 25 percent tariffs on an initial $34 billion of Chinese imports. Beijing retaliated with matching tariffs on the same amount of U.S. exports to China.

Washington is preparing to also impose tariffs on an extra $16 billion of goods in coming weeks, and Trump has warned he may ultimately put them on over half a trillion dollars of goods - roughly the total amount of U.S. imports from China last year.

The $200 billion list of goods targeted for tariffs - which also include Chinese tilapia fish, printed circuit boards and lighting products - would have a bigger impact on consumers than previous rounds of tariffs.

Erin Ennis, senior vice president of the U.S.-China Business Council, said a 10 percent tariff on these products is already problematic, but more than doubling that to 25 percent would be much worse.

"Given the scope of the products covered, about half of all imports from China are facing tariffs, including consumer goods," Ennis said. "The cost increases will be passed on to customers, so it will affect most Americans' pocketbooks."

Trump had said he would implement the $200 billion round as punishment for China's retaliation against the initial tariffs aimed at forcing change in China's joint venture, technology transfer and other trade-related policies.

He also has threatened a further round of tariffs on $300 billion of Chinese goods.

The U.S. Trade Representative's office initially had set a deadline for final public comments on the proposed 10 percent tariffs to be filed by Aug. 30, with public hearings scheduled for Aug. 20-23.

It typically has taken several weeks after the close of public comments for the tariffs to be activated.

(Reporting by Steve Holland and David Lawder in WASHINGTON, and Ben Blanchard in BEIJING; Writing by Mohammad Zargham and Michael Martina; Editing by Sandra Maler and Nick Macfie)

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