Adds new Trump actions on tariffs.
US president Donald Trump ordered an increase in tariffs on imports from China after Beijing today struck back against his latest round of tariffs on imports from China by imposing a 5pc tariff on imports of US crude.
The existing 25pc tariff on $250bn/yr of imports from China will be raised to 30pc effective 1 October, Trump said via Twitter. An additional $300bn/yr in imports from China, which was set to be taxed at 10pc, will be subject to a 15pc tariff.
Earlier today, Beijing announced retaliatory tariffs on a total of $75bn/yr in imports from the US. The countermeasures include a tax on US crude exports that was exempted in the previous rounds of retaliatory tariffs on a total of $75bn/yr in imports from the US.
The tariff on US crude will be effective on 1 September, the same day as the US plans to implement a 10pc tariff on an additional $133bn/yr in imports from China. A further $165bn/yr in imports from China will be subject to tariffs on 15 December, meaning the entirety of imports of goods from China will be affected. Beijing's response now will encompass nearly the entirety of the $130bn/yr of imports from the US.
Beijing equally staggered its response, holding back some of the planned tariffs, including a 25pc tax on car imports, until 15 December.
Beijing announced its countermeasures just a day before the G7 summit in France where Trump plans to tout the strength of the US economy. But the trade war is expected slow growth in the US and China, with peripheral effects on global growth. The tariffs in place even before the latest round of escalation already will shave 0.3 percentage points off US GDP growth in 2020, analysts with the Congressional Budget Office said yesterday.
Beijing says its latest tariffs are "a forced move to deal with US unilateralism and trade protectionism." It leaves room open for dialog, but there is no confirmation that trade talks tentatively scheduled between the US and China for early September will proceed.
With the entire bilateral volume of trade now subject to existing or planned tariffs, both countries are looking at possible countermeasures on other fronts.
The US is lending support to Vietnam's claim to explore for oil and gas in the South China sea. The State Department yesterday issued a protest against Beijing's "aggressive steps to interfere with ASEAN claimants' longstanding, well-established economic activities, in an attempt both to coerce them to reject partnerships with foreign oil and gas firms, and to work only with China's state-owned enterprises."
The State Department noted that "US companies are world leaders in the exploration and extraction of hydrocarbon resources, including offshore and in the South China Sea." But US companies are not involved in exploration in the disputed areas. "China has sovereignty over the Nansha Islands and its adjacent waters and has sovereign rights and jurisdiction over the relevant waters," Chinese foreign ministry said in response.
US energy and business groups, which have warned of potential consequences from ratcheting up the tariff pressure on China, urged the administration to find a negotiated solution to the trade war.
"This escalation of the US-China trade war is another step in the wrong direction, the consequences of which will be felt by American businesses and families," American Petroleum Industry vice-president Kyle Isakower said.
"Today's Chinese retaliation is unfortunate but not unexpected," the US Chamber of Commerce said.
China in May raised tariffs on US LNG imports to 25pc, closing off the market to US exporters. US crude exports trended lower even before the latest Chinese action. US crude shipments to China averaged 140,333 b/d in January-June, down by 37pc on the year, US government data show.
