Published: Tue, September 18, 2018
Money | By Ethel Goodwin

Shares knocked lower after new USA tariff threat on Chinese goods

Shares knocked lower after new USA tariff threat on Chinese goods

US President Donald Trump's administration will impose a 10 per cent tariff later this month on $200 billion worth of Chinese goods, increasing to 25 per cent at the end of the year, a move that will sharply escalate the American trade war with Beijing.

In a statement, Trump said the tariffs will take effect on September 24, at 10 percent until the end of the year, when they will rise to 25 percent.

Sohn said he thinks that China will retaliate against every US tariff and that the back-and-forth sparring will escalate until the taxing all Chinese imports - $524 billion a year ago.

Mr Trump's economic adviser, Larry Kudlow, earlier said they were still happy to talk: "We are ready to negotiate and talk with China anytime they are ready for serious and substantive negotiations", he said.

USA trade actions against China will not work as China has ample fiscal and monetary policy tools to cope with the impact, a senior securities market official said.

Victoria University professor Siah Hwee Ang, an expert in Asian trade, forecast China would retaliate to the latest United States tariffs within days.

Apple shares fell 2.6 per cent, amid concerns it might be caught in the middle of an escalating trade war.

The new taxes will hit a broad swath of products, including billions in Chinese-made voice data receivers, computer memory modules, automatic data processors, and accessories for office equipment such as copiers and bank note dispensers - instantly making widely used goods more expensive.

Market unease over the "trade war" has been good for the Dollar so far, but that is with China having responded only by imposing its own smaller retaliatory tariffs.

McClay said no escalation of tariffs was good for a small country like New Zealand, "particularly between the world's largest and second-largest economies", and he was not sure if the Government was paying enough attention to its trading partners.

China has already imposed retaliatory tariffs on $50 billion worth of USA goods in response to Washington's previous measures.

The US Treasury had invited Chinese officials for more talks to try to resolve trade differences last week but the prospect of negotiation seems bleak now. "I think it's going to work out very well with China", he said. But he lowered the proposed duty rates back to 10 percent after announcing last month that they should be increased to 25 percent.

However, this latest round is the biggest to date, and unlike the earlier rounds this latest list targets consumer goods, such as luggage and furniture.

"Our concern with these tariffs is that the U.S. will be hardest hit, and that will result in lower United States growth and competitiveness and higher prices for USA consumers", Apple said in a letter commenting on the proposal.

But there is little prospect of such an outcome because, while the USA is demanding that the trade deficit with China be reduced, the conflict does not merely centre on that issue. These new tariffs would reportedly take effect "within weeks".

Officials in Beijing have already announced that they will retaliate against the United States if the new levies are imposed.

Excluding fuel, import prices rose just 1.3 per cent over the past year, according to the Bureau of Labor Statistics.

Still, he said, the US economy appears strong enough to withstand the damage.

U.S. industries have generally opposed tariffs, arguing they increase prices for consumers and could hurt economic growth.

Talks between the European Union and Britain on Brexit are being conducted in a spirit of "good cooperation", said Michel Barnier, the EU's chief negotiator on the issue.

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

But many everyday items such as suitcases, handbags, toilet paper and wool are included in this latest round of tariffs.

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