China considers response to Donald Trump metals tariff hike plan
There is no response so far to a US suggestion for tariffs of 25% on steel and 10% on aluminium.
Chinese leaders are considering whether potential US hikes in steel and aluminium tariffs justify starting a dispute that might disrupt access to one of China’s biggest markets.
Beijing gave no immediate reaction to US president Donald Trump’s plan for tariffs of 25% on steel and 10% on aluminium.
Asian stock markets fell amid talk of a “trade war”.
Chinese leaders must weigh the need to back up threats with action against the risk of disrupting US market access for smartphones and other exports that matter more to the economy than metals.
“China will definitely respond. It doesn’t want to be seen as weak. But it will be relatively restrained,” said economist Louis Kuijs of Oxford Economics.
“They don’t want to be seen as a party that is wrecking the international trading system.”
Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!— Donald J. Trump (@realDonaldTrump) March 1, 2018
Beijing has accused Mr Trump of undermining global trade regulation by taking action over steel, technology policy and other disputes under US law instead of through the World Trade Organisation (WTO).
Chinese officials have been asking the White House since last March to avoid hurting both sides by disrupting aluminium trade.
Their tone hardened after Mr Trump launched a probe in August into whether Beijing improperly pressures companies to hand over technology and in January raised duties on Chinese solar modules and washing machines.
“China will take necessary measures to defend its interests,” said a Commerce Ministry official, Wang Hejun, in a statement.
Japan and South Korea, both US allies and major exporters of steel and aluminium, said they would ask for exemptions from the tariff hike, which Mr Trump justified in part on national security grounds.
China will take necessary measures to defend its interests Chinese Commerce Ministry
“We don’t think imports from Japan, an ally, have any effect at all on US national security,” said Japan’s trade and industry minister, Hiroshige Seko.
A South Korean trade envoy met Mr Trump’s chief economic adviser and Commerce Secretary to “strongly demand” they keep the impact on South Korean companies to a minimum, a trade ministry statement said.
The president of the European Union’s governing body, Jean-Claude Juncker, said the 28-nation trade bloc will retaliate if Mr Trump follows through.
“Risks of trade wars are rising, but should be contained for now,” said Cesar Rojas and Ebrahim Rahbari of Citigroup.
“We expect US major trade partners’ reaction to be moderate, including by taking cases to the WTO.”
Beijing has an array of high-profile targets for retaliation including suppliers of soybeans, the biggest American export to China. A curb on purchases could hurt farm state voters who supported Mr Trump.
“We’ve clearly heard from the Chinese” that soybeans “are definitely one of the largest things that could be targeted,” said Jake Parker, of the US-China Business Council.
However, Mr Parker said, soybeans might be held for use later on a bigger issue such as the “301” investigation into Beijing’s technology policy, which could have a broader impact.
Trade makes up a smaller share of China’s economy than it did a decade ago. But export-driven industries support millions of jobs, raising the potential political cost of any disruption.
The US, China’s biggest trade partner after the EU, buys about 20% of Chinese exports but allows Beijing to run multibillion-dollar surpluses that offset its deficits with other partners.
Last year, China exported goods worth 2.80 dollars to the United States for every dollar of American goods it bought, according to Chinese data.
Its trade surplus of 275.8 billion dollars (£200 billion) with the United States was equal to 65% of its global total.
“That makes China the more vulnerable partner in this,” said Kuijs.
Earlier, the Commerce Ministry expressed “grave concern” about a trade policy report sent to the US Congress by the White House this week.
It accuses China of moving away from market principles. It pledges to prevent Beijing from disrupting global trade.
The ministry said Beijing has satisfied its trade obligations and appealed to Washington to settle market access and subsidy disputes through negotiation.