USA tech firms may feel brunt of China's trade counter attack

Soybean prices have fallen dramatically in recent weeks.
Daniel Acker  Bloomberg

Some Korean exports could replace Chinese goods to be slapped with tariffs, for example.

The previous round of tariffs: The Trump administration last week imposed 25 percent tariffs on $34 million in Chinese goods, prompting Beijing to impose retaliatory tariffs of the same amount on U.S. imports.

The US Trade Representative's office announced a $200 billion list on Wednesday of Chinese goods for possible 10 percent tariffs including fish, apples and burglar alarms.

Some members of Trump's own Republican party are calling the trade war unwise while American businesses and economists warn it could derail the strongest global upswing in years.

The Chinese government vowed Wednesday to take "firm and forceful measures" against US threats to expand tariff hikes to thousands of products like fish sticks, apples and French doors as their trade dispute escalates.

The Office of the U.S. Trade Representative will accept public comments and hold hearings on the plan August 20-23 before reaching a decision after August 31, according to a senior administration official.

Li Yong, a senior fellow at the China Association of International Trade in Beijing said one retaliatory tactic China could deploy would be a bigger push to attract foreign investment, just not from the U.S. In a statement, it called the USA actions "completely unacceptable". They warned it will be hard to contain spillover effects if the dispute worsens from here, risking "a much bigger disruption to global production and trade activity, affecting investment incentives and dragging on global economic growth".

South Korea's trade ministry said the trade war could be "prolonged and spread", adding that it would prepare responses and scenarios to cope with the economic impact of the trade row.

The dramatic move by Trump sent a shockwave through Asian markets last night, with the Shanghai Composite index dropping 2.1 per cent and the CSI300 index of major Shanghai and Shenzhen stocks tumbling 2 per cent.

S&P 500 and Dow futures dropped around 1 per cent, pointing to a weak opening on Wall Street later on Wednesday.

One reason why Wall Street is anxious: The People's Republic, which bought $154 billion in USA imports a year ago, is quickly running out of American products to hit with tariffs. China retaliated with duties on the same value of United States goods.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, responded to Lighthizer's announcement with dismay. "The president made everyone well aware of them".

"American families are the ones being punished".

The National Association of Manufacturers also criticized the US decision, saying this latest round of tariffs could undermine the economic gains from the administration's tax and regulatory reform policies.

"The United States has unveiled the list of tariffs in an escalating manner", a spokesperson for China's Ministry of Commerce said.

U.S. Trade Representative Robert Lighthizer said Washington did a thorough investigation to justify imposing tariffs on $50 billion worth of imports to compensate for the harm to the U.S. economy caused by China's unfair trading practices, including theft or forced transfer of American technology.

Bloomberg explored a few of China's options. "It has to resolutely fight back while taking proper measures to help minimise the cost to domestic enterprises and further open up its economy to global investors", it said.

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