China vows to counter US tariffs
After months of truce, the trade war between China and the US escalated on Friday, after the US shrugged off widespread warnings and moved to hike tariffs on Chinese goods, drawing a firm response from China, which vowed to retaliate.
Though Chinese and US officials are continuing talks, the renewed tensions between the world's two largest economies significantly complicated ongoing negotiations, dimmed the prospects of any potential trade agreement and stoked fear that a full-fledged trade war could still break out. And the US is to blame for the risky turn of events, Chinese officials and analysts stressed.
After days of repeated threats, US officials on Friday noon (Beijing Time) increased an existing 10 percent tariff on $200 billion in Chinese goods to 25 percent, breaking a truce reached by the leaders of the two countries in December 2018 and highlighting the unreliable and unpredictable nature of the US administration.
Minutes after the US tariff hike took effect, China struck back. In a statement, the Chinese Ministry of Commerce said that China "will have to take necessary countermeasures," while still urging the US to meet China halfway in ongoing negotiations in Washington.
Even as tensions escalated, officials pushed through with the 11th round of negotiations as they try to make a last-ditch effort to bring the months-long talks back on track for a trade agreement.
The Chinese delegation was seen arriving at the Office of the US Trade Representative at around 5 pm on Thursday US time and left about an hour and half later. The talks will continue on Friday morning, according to US media reports.
"We are now at a very delicate place, where further negotiations have become significantly more difficult… the risk of a further escalation also increased," Song Guoyou, director of Fudan University's Center for Economic Diplomacy, told the Global Times on Friday. "We cannot allow this to become normal. That would be dangerous."
Chinese officials have repeatedly stressed that China does not want to fight a trade war, but Washington's aggressiveness and belligerence left them no other option but to fight back, analysts said.
"China will also have to make good on its own words, otherwise, it will be at a huge disadvantage to the US team at the negotiations," said He Weiwen, a former senior Chinese trade official, told the Global Times on Friday, referring to China's earlier vow to retaliate if the US went ahead with the tariff threat.
Though the MOFCOM on Friday did not say what countermeasures China will take and when it will implement them, there are many ways China can inflict pain on the US economy, according to analysts.
"The most direct countermeasure would be raising existing tariffs on US goods or imposing tariffs on more US products," Song said. "However, we cannot rule out other policy tools."
Song pointed out that with the overall trade relationship souring, US companies' operations and investments in China could also be impacted, given the rising anger among the Chinese public toward the US.
In the wake of renewed tensions, calls on Chinese social media to boycott US products rose, including US films, iPhones and computers. "Why retaliate? All we need to do is boycotting US products," one internet user said on Sina Weibo.
Chinese analysts also suggested that China could target the US financial system, the backbone of the US economy, including unloading China's holdings of US Treasury bonds. Big US corporations and products, such as agricultural goods, will also likely encounter more scrutiny in China.
"Such an impact on US companies and industries will not be less severe than from the tariffs," Song said.
Many US business groups have expressed strong opposition to the tariffs. On Wall Street, US stocks have also suffered losses in the past few days, as have stocks in major bourses across the world.
While it remains to be seen whether trade officials could still make a breakthrough at the talks, it is clear that the escalation complicates the talks and dims prospects for a deal, analysts said.
"I don't expect too much from this round of talks," a source in Washington familiar with the talks told the Global Times on Friday, noting that US President Donald Trump had miscalculated.
"He initially wanted to show how he forced China into making concessions," the source, who spoke on condition of anonymity, said. "But that is like forcing China not to sign the deal quickly".
However, citing US eagerness, other observers have also argued that there is still a chance for the two sides to reach a deal.
"I think there is still a chance for the two countries to reach an agreement," Sang Baichuan, director of the Institute of International Business at the University of International Business and Economics in Beijing, told the Global Times on Friday, noting that the two sides still appear eager to reach a deal, despite their tough rhetoric.
In what appears to be an attempt to leave room for talks, US officials offered a grace period for the tariff hike. Trump also said on Thursday that a deal is still "possible" this week and that he might speak to Chinese President Xi Jinping by phone, CNBC reported.
Asked about the phone call, Geng Shuang, a spokesperson for the Chinese Foreign Ministry, said on Friday that he was not aware of such a plan but the two leaders have maintained close contact.