Markets

Major Car Exporters Weigh Response to Trump's Threat of Tariffs

Major Car Exporters Weigh Response to Trump's Threat of Tariffs

The latest signal that China's economy may be feeling some pain associated with Trump's tariffs on about $34 billion in Chinese goods was the softening of the Purchasing Managers' Index (PMI) in July.

This wave of tariffs would include a wide range of products, from dog food to furniture, bicycles to 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.

Earlier on Wednesday, Congress passed legislation that will strengthen national security-related checks on Chinese investment in the USA, a move that is also aimed at curbing China's ability to capture valuable American technology.

In fact, the rate of growth in the first half well exceeded the 3.6 percent increase in imports of copper in the first half of 2017, showing that not only is China importing more of the industrial metal, it's doing so at a faster pace.

China's government, however, shows no sign of bending to Washington's pressure. What these numbers do not show is that if USA goods are sent to China for assembly and then returned to the United States, these so-called "intermediate goods" are considered Chinese imports, even if the parts are made in the US.

China's Foreign Ministry spokesman Geng Shuang reiterated at a regular news briefing in Beijing that the United States' efforts at "blackmail" would fail.

The administration has said the tariffs would remain in effect until China opens its markets to more competition and stops what the USA says are unfair practices.

The United States has imposed tariffs on other nations too, including Canada and Mexico, Washington's partners in the North American Free Trade Agreement. "But dialogue must be based on mutual respect, equality, rules and credibility", said Geng.

"If we're going to use tariffs, this gives us more flexibility and it's a more meaningful threat", he said, adding that Trump's pressure strategy will not work if he does not resolve trade disputes with USA allies such as the European Union, Mexico and Canada.

Washington imposed additional 25 percent tariffs on $34 billion of Chinese goods July 6 in response to complaints Beijing steals or pressures companies to hand over technology. China responded with tariffs on $34 billion in US goods, including a wide range of agricultural products.

Beijing responded to news reports on Tuesday about the planned tariff increase by cautioning the US against "blackmailing and pressuring" and it vowed to strike back at every escalation.

Mickey Kantor, who was USA trade representative under President Bill Clinton, warned that a trade war with China will take a toll on a US healthy economy that from April through June registered the fastest growth since 2014.

US President Donald Trump has escalated his trade war with China, ordering his administration to consider more than doubling proposed tariffs on $200 billion worth of Chinese goods to 25 per cent from 10 per cent, as talks between Washington and Beijing remain at a standstill.

Beijing's earlier round of tariffs appeared created to minimize the impact on the Chinese economy by targeting soybeans, whiskey and other goods available from Brazil, Australia and other suppliers. A hearing on the levies is scheduled for August 20-23.