China retaliates, slaps duties on US soybeans, planes, cars
Less than 11 hours after US announces tariffs, Beijing introduces fresh measures on soybeans, planes, cars
BEIJING/WASHINGTON: China hit back quickly yesterday against the Trump administration's plans to slap tariffs on US$50 billion (S$65 billion) in Chinese goods, retaliating with a list of similar duties on key US imports including soybeans, planes, cars, beef and chemicals.
The speed with which the trade struggle between Washington and Beijing is ratcheting up - China took less than 11 hours to respond - led to a sharp sell-off in global stock markets and commodities.
US President Donald Trump denied that the tit-for-tat moves amounted to a trade war between the world's two economic superpowers.
"We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US," Mr Trump tweeted yesterday.
Investors were wondering how far one of the worst trade disputes in many years could escalate.
"The assumption was China would not respond too aggressively and avoid escalating tensions. China's response is a surprise for some people," said Mr Julian Evans-Pritchard, senior China economist at Capital Economics, noting that neither side had yet called for enforcement of the tariffs.
US-made goods that appear to face added tariffs in China, based on an analysis of Beijing's list, include Tesla electric cars, Ford's Lincoln auto models, Gulfstream jets made by General Dynamics, Boeing planes, and Brown-Forman Corp's Jack Daniel's whiskey.
Unlike Washington's list, which was filled with many obscure industrial items, China's list strikes at signature US exports, including soybeans, frozen beef, cotton and other key agricultural commodities produced in states from Iowa to Texas that voted for Mr Trump.
Tobacco and whiskey, for example, are both on Beijing's list and are produced in states including Kentucky, home of Senate Majority Leader Mitch McConnell.
"It is more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force," said Mr Evans-Pritchard.
Beijing's list of 25 per cent additional tariffs on US goods covers 106 items, China's commerce and finance ministries said. The effective date depends on when the US action takes effect.
"This is a real game changer and moves the trade dispute away from symbolism to measures that would really hurt US agricultural exports," said Commerzbank commodities analyst Carsten Fritsch.
Analysts and executives at feed-makers said China will struggle to replace US soybeans.Soybeans were the biggest US agricultural export to China last year at a value of US$12 billion. China gobbles up 60 per cent of globally traded soybeans to feed the world's largest livestock industry.
"There simply aren't enough soybeans in the world outside of the US to meet China's needs," said Mr Mark Williams, chief Asia economist at Capital Economics.
"As for reducing dependence on imports, there are a few options, but none is a magic bullet that could hurt US farmers without generating costs at home."
Brazil supplied half of China's imports last year while the US shipped around 33 million tonnes, about a third of the total. - REUTERS