By Joyce Yu
Philadelphia, PA–China says it must retaliate against tariffs ‘to defend the nation’s dignity’ after President Donald Trump instructed U.S. Trade Representative Robert Lighthizer to consider raising proposed tariffs on $200 billion in Chinese goods to 25% from 10%.
In a statement on Thursday, the Chinese Ministry of Commerce said, “China is fully prepared and will have to retaliate to defend the nation’s dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries.”
Derek Scissors, a resident scholar at the American Enterprise Institute, opined the proposed increase are meant to account for the recent sharp decline in China’s currency. “In the past six months … China has allowed its currency, the renmenbi, to depreciate. It’s depreciated a total of 8 percent since the spring,” he told NPR on Thursday.
The U.S. has already imposed tariffs on $34 billion in Chinese imports, which were met with retaliatory charges by China. Urging US trade policymakers to “calm down”, Chinese foreign minister Wang Yi, while attending the Asean foreign ministers’ meetings in Singapore on Thursday, said, “We hope that those directly involved in the United States’ trade policies can calm down, carefully listen to the voices of U.S. consumers…and hear the collective call of the international community.”
“Nowadays we live in a globalized world. We are not doing 19th century trade,” he added and noted that 60% of Chinese exports to the US are manufactured by companies backed by foreign investment, including from the US. “Is the United States trying to put tariffs on its own companies . . . is the US administration trying to raise the living cost of its own consumers?”
Global equity reacted adversely to the latest development, with Chinese stocks market falling 2%. Most Asian markets retreated with Hong Kong Heng Seng index losing 2.2%. Wall Street performance was relatively mild on Thursday. Dow inched down by just 0.5% in the morning session; both S&P 500 and Nasdap gained slightly.
“Markets are substantially weaker as investors are spooked out by the latest development in the trade battle,” Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey, told Reuters. “Economic strength is evident and the jobs market is strong, but the trade war is creating turbulence for investors and trading is expected to be choppy, volatile and could easily change direction.”
Chinese stocks market, on the other hand, was hit badly by trade war, and has been one of the world’s worst performing major stock markets this year, losing more than 20% since their late January peak. Export-focused technology and industrial companies feel the most pain.
