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China launches trade-war retaliation with new round of tariffs on U.S. imports

A display of lipstick from U.S. cosmetics brand Bobbi Brown at a shop in Beijing. Perfume, wine and pianos are among the US products that will be hit by a steep increase in Chinese tariffs.
Bloomberg

China raised tariffs on tens of billions of dollars of goods imported from the U.S., implementing the promised retaliation to President Trump’s latest round of trade war duties on about $200 billion in Chinese exports.

As of Saturday in Beijing, retaliatory extra tariffs have been imposed on U.S. exports at the following levels:

  • 25% tariffs on 2,493 items, up from 10% previously. These include some mechanical parts, natural gas and skincare products
  • 20% tariffs on 1,078 items, up from 10% previously. These include some machinery, wood and optical instruments
  • 10% tariffs on 974 items, up from 5% previously. These include sheet glass, lasers and control valves
  • 5% tariffs continue on 595 items. Auto parts, which were initially on the list but have been exempted since January, are still excluded

The expected tariffs come as challenges pile up for the world’s second-largest economy, with output slowing and signs of financial stress appearing. Both countries have signaled that they are digging in for a long-term rivalry, with one Chinese government-affiliated researcher seeing tensions lasting until 2035 and the government announcing that it will fight till the end if the U.S. keeps escalating.
“The most evident impact of the retaliatory tariffs will be on sentiment,” said Liu Peiqian, Asia strategist at Natwest Markets Plc in Singapore, adding that markets have shown higher stress levels in May. “The economic impact of the tariffs will be minimal. What we are actually watching is whether the policy makers will tweak the easing policy.”

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The bilateral tariffs have dented U.S.-China trade, with goods hit with the taxes suffering a blow even as exporters front-loaded shipments. While punitive duties now cover more than two-thirds of China’s imports from the U.S., the actual impact may be mitigated as the government will allow companies to apply for exemptions. Goods will be exempted for a year after approval, according to the Ministry of Finance.

Airplanes, some petroleum-based oils, turboprop engine parts, and some integrated circuits are among goods still not covered by any punitive duties.

The trade war is spinning out of the tariff domain, with the U.S. blocking Huawei Technologies Co. from purchasing U.S. products or doing business there, and looking to do the same to other Chinese hi-tech companies. Beijing has readied a plan to restrict exports of rare earths to the U.S., if needed, as both sides in the trade war dig in for a protracted dispute, Bloomberg reported Friday.

China will also establish a list of so-called “unreliable” entities in order to target firms it says damaged the interests of domestic companies, according to a statement from the Ministry of Commerce on Friday. The move potentially targets a vast swathe of the global tech industry.

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“Uncertainties surrounding trade frictions, particularly the technology restrictions, might still weigh on sentiment,” Wang Hanfeng, an analyst at China International Capital Corp., wrote in a note Friday. “There are still lots of uncertainties especially related to the technology restrictions.”


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