China will fight back if USA raises tariffs on imports


The U.S. and China sent conflicting signals over trade, with President Donald Trump expressing optimism about the prospect of a deal and Beijing warning that it will retaliate if the U.S. follows through on a threat to hike tariffs.

Sunday's (May 6th) comment came as a surprising move by USA president to mount pressure on China, since he had cited progress on trade talks as early as last Friday (May 3rd).

Mr Trump also demanded that China adopts policy changes that would, among other things, make its market more accessible to USA companies.

Investors will likely have to deal with a volatile market for some time amid uncertainty over whether the US and China can reach agreement on trade. Trump said the slow pace of negotiations was behind upping the tariffs. He did not elaborate.

Separately, China's Commerce Ministry said it would respond in kind, adding that escalating trade frictions were not in the interest of either country or the world.

"This undermines the core architecture of the deal", said a Washington-based source with knowledge of the talks. -China trade dispute, to the talks.

The stock market falls come after a period of strong first-quarter earnings for U.S. companies. Until Sunday, markets had priced in the expectation that officials from the two countries were close to striking a deal.

Changing any law in China requires a unique set of processes that can't be navigated quickly, said a Chinese official familiar with the talks.

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And the USA has maintained that some tariffs will remain on China as the deal comes into effect, even though Beijing has insisted they must be lifted.

Trump also has sought massive hikes in Chinese purchases of US farm, energy and manufactured products to shrink a gaping USA trade deficit with China. If tariffs are going to go from 10% to 25% on $200 billion worth of goods, this might only represent an additional cost to the USA economy of about $30 billion (at a new $50 billion, versus a prior $20 billion) using straight-line math.

While these numbers sound massive, it's important to consider that the US gross domestic product is now running close to $21 trillion on an annualized basis.

The USTR data showed that the United States' combined goods and services trade with China totaled an estimated $737.1 billion in 2018.

"The President did not appreciate this effort to renegotiate", said Michael Pillsbury, a China scholar at the Hudson Institute who advises the Trump administration.

"The entire economic team. are completely unified and recommended to the president to move forward with tariffs if we are not able to conclude a deal by the end of the week".

Trump said in another tweet on Wednesday that "China has just informed us that they (Vice-Premier) are now coming to the make a deal".

"China supplies the United States with several chemicals which are not available anywhere else and which are critical inputs to U.S. manufacturing", he said, noting that China is also is the number three USA export market.