China to slap additional tariffs on US$75b of US goods

Beijing

CHINA announced plans to impose additional tariffs on US$75 billion of American goods including soya beans, cars and oil, with the retaliation for US President Donald Trump's latest planned levies on Chinese imports sending US stock futures tumbling.

Some of the countermeasures will take effect starting Sept 1, while the rest will come into effect from Dec 15, according to the announcement from the Finance Ministry. This mirrors the timetable that the US has laid out for 10 per cent tariffs on nearly US$300 billion of Chinese shipments.

An extra 5 per cent tariff will be put on American soya beans and crude oil imports starting next month. The resumption of a suspended extra 25 per cent duty on US cars will resume on Dec 15, with another 10 per cent on top for some vehicles. With existing general duties on cars taken into account, the total tariff charged on US made cars would be as high as 50 per cent.

Among carmakers, Tesla Inc and Germany's Daimler AG and BMW AG are the most vulnerable to the additional levies. Shares of the two German companies fell at least 2 per cent in Frankfurt, while Tesla fell in premarket trading in New York.

BMW and Daimler ship large numbers of sport utility vehicles from plants in the US to China, while Tesla does not yet make its electric cars in the country. Six of the top 10 vehicles exported from the US to the world's biggest car market are from the two German brands, according to forecaster LMC Automotive.

The news from Beijing rekindled concerns about the world's two largest economies and a global growth outlook that is already looking shaky. US stock futures dropped along with Treasury yields and oil prices. Emerging market and commodity- related currencies also declined, while havens such as the yen and gold were supported.

While China will impose a new 5 per cent levy on oil, there was no new tariff on liquefied natural gas. Tariffs will be placed on various agricultural goods, including a 10 per cent tax on imports of US pork.

In Washington, the initial reaction from the White House was aimed at easing concerns about the fallout. "The amount of money being tariffed is not material in terms of macro growth," Trump adviser Peter Navarro said on Fox Business Network. The retaliation will "absolutely not" slow growth, he said.

China's announcement comes as leaders from the Group of Seven nations prepare to meet in France and central bankers gather in Jackson Hole, Wyoming, to discuss issues such as the global slowdown. The Chinese announcement was foreshadowed by a tweet from Hu Xijin, the editor- in-chief of the Global Times, a newspaper controlled by the ruling Communist Party.

China promised earlier this week that any new tariffs from the US would lead to escalation and retaliation. The US has said it will increase tariffs on some Chinese goods starting on Sept 1, although Mr Trump has already delayed some of that increase amid economic turbulence.

After Mr Trump gave the go-ahead earlier this month for 10 per cent tariffs on the nearly US$300 billion in Chinese imports that have not been hit by higher duties, China halted purchases of agricultural goods and allowed the yuan to weaken.

Negotiators have spoken by phone since then and are planning another call in coming days. People familiar with their intentions previously said that the Chinese delegation is sticking to their plan to travel to the US in September for face-to-face meetings, which may offer a chance for further reprieve.

The US side is still hoping for that visit to happen, with Mr Trump's economic adviser Larry Kudlow telling Fox Business Network that "hopefully we are still planning on having the Chinese team come here to Washington DC to continue the negotiations". "I don't want to predict, but we will see," he said on Thursday in Washington. BLOOMBERG