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China promises retaliation if US imposes more tariffs

Chinese President Xi Jinping attends an inauguration ceremony in Hong Kong in 2017. Photo: Getty Images

China on Monday promised retaliation if US President Donald Trump escalates their tariff battle, raising the risk Beijing might target operations of American companies as it runs out of imports for penalties.

The threat came after Trump said on Friday he was considering extending penalties to an additional $267 billion of Chinese products in their battle over Beijing's technology policy. That would be on top of $50 billion of goods already hit by 25 percent duties and another $200 billion on which Washington is poised to raise tariffs.

"If the United States insists on imposing another round of tariffs on Chinese products, China will definitely take countermeasures to safeguard its legitimate rights and interests," foreign ministry spokesman Geng Shuang said.

Geng gave no details, but the government said in June that it would impose unspecified "comprehensive measures" if necessary. That left American companies on edge about whether Beijing might use its control over the heavily regulated economy to disrupt their operations by withholding licenses or launching tax, anti-monopoly or other investigations.

The policy moves by the Trump administration have been "both unimaginable and unreasonable" and "have gone beyond trade friction" to become a trade war designed to hurt Chinese technology and manufacturing industries, Chen Wenling, the chief economist at the China Center for International Economic Exchange, said on Monday. The think tank is tied to the Chinese government.

Because the United States has already touched both the bottom line — the economy — and the "red line" of Taiwan, "China has to fight back," she said. "China will not hesitate to inflict pain on the United States."

Trump has repeatedly attacked China for what he says are unfair trade practices. The United States has already imposed billions of dollars in tariffs on goods imported from China, and on Friday Trump threatened to add another $267 billion to the list.

China will match what the United States does, because it "always believes in reciprocal acts," Chen said.

While trade wars always hurt both parties, this one will hurt US consumers, which will then affect the whole US economy, Chen said. Currently the United States is on an "adrenaline high" from tax cuts and other policy measures that have helped keep the stock market at or near highs and unemployment very low, Chen said. But "people will wake up from the Trump frenzy," she said, and realize the cost of these policies. She forecast that this "distorted opinion" would wear off in the latter half of this year as the effects of the trade war filter down to consumers.

The United States has also shifted a long-held stance on the sensitive issue of Taiwan, which China sees as a part of China. In March, Trump signed the Taiwan Travel Act, which allowed for official visits between the self-governed island and the United States, and a few weeks ago, Taiwan's president visited Houston. China objects to all of this.

The United States has also recalled its top diplomats from Dominican Republic, El Salvador and Panama for consultations over those countries' recent decisions to no longer recognize Taiwan. El Salvador cut ties with Taiwan in August, Dominican Republic in May and Panama last summer. With the recent severed ties, the number of Taipei's formal diplomatic allies is just 17.

China is ready to defend its sovereign integrity through all means, political and military, said Xu Changchun of the China Center for International Economic Exchange's strategic research department. Economically, China and the United States are interdependent, so if China were to sever some economic ties, it would hurt itself as well, he said.

"We are like two brothers: when we get along, we can go and make money together," he said. "When we don't get along, both are hurt."

Other countries along the global supply chain will also be hurt, Xu added.

Both Chen and Xu emphasized that they would prefer a good and far-reaching relationship that is mutually beneficial. Xu suggested that the current policies will not last, because Trump cannot change the nature of the global supply chain single-handedly, and eventually the cost to American consumers and the economy will become evident.

Trump and his administration "are a bit irrational" and self-satisfied, Chen said. Citing Trump's reversal on a jointly announced trade agreement that he quickly superseded with tariffs days later, Chen added: "Trump's repeated failure to keep to his words is giving the United States a very bad global image."

China's exports to the United States have been unexpectedly resilient, rising by double digits in July and August despite the US tariff hikes. That might add to Washington's frustration and prompt more import controls.

Exports to the United States in August rose 13.4 percent to $44.4 billion, ticking up from July's 13.3 percent growth. Chinese imports of US goods rose 11.1 percent to $13.3 billion. China's trade surplus with the United States widened to a record $31 billion.

Chinese leaders agreed in May to narrow that trade gap by purchasing more American soybeans and other products. But they reject Trump's demand to roll back official industry plans such as "Made in China 2025," which calls for state-led creation of global champions in robotics, artificial intelligence and other technologies.

Washington, Europe and other trading partners argue those plans violate Beijing's market-opening pledges. American officials worry they might erode US industrial dominance. But Chinese leaders see them as China's path to prosperity and global influence.

Chinese regulators have shown their willingness to attack foreign companies in disputes with other governments.

Last year, Beijing destroyed South Korean retailer Lotte Group's business in China after the company sold a golf course in South Korea to its government for construction of a missile defense system opposed by Chinese leaders.

Beijing closed most of Lotte's 99 supermarkets and other outlets in China. Seoul and Beijing later mended relations, but Lotte gave up and sold its China operations.

China's entirely state-controlled media also have encouraged consumer boycotts against Japanese, South Korean and other products during disputes with those governments.


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