Amid the United States President Donald Trump’s imposing an additional 34 percent tariff on China, the latter on Monday accused the US of unilateralism, protectionism, and economic bullying with tariffs, reported Reuters.
Speaking to reporters on China’s position, Chinese foreign ministry spokesperson Lin Jian told reporters, “Putting the US first over international rules is a typical act of unilateralism, protectionism and economic bullying.”
Last week, Donald Trump announced sweeping tariffs and China and other governments retaliated quickly.
According to Lin, the new US tariffs harmed the stability of global production and supply chain. He added that the new tariffs seriously impacted the world’s economic recovery.
China also imposed export controls on seven rare earth elements, including gadolinium (used in magnetic resonance imaging) and yttrium, which is used in consumer electronics.
On Sunday, Chinese Vice Commerce Minister Ling Ji told a panel of US company representatives, as quoted by Reuters, including Tesla and GE Healthcare, China would protect the “legitimate rights and interests of foreign-funded enterprises in accordance with the law, and actively promote the resolution of foreign-funded enterprises’ problems and demands.”
Ling, also China’s deputy trade negotiator, suggest Beijing has no plans to penalise US companies, despite Trump administration escalated a tariff war with the rest of the world including China.
US’ tariff impact on Chinese stocks:
Earlier last week, Trump administration introduced an additional 34 percent tariff on Chinese goods as part of steep levies imposed on most U.S. trade partners, bringing the total duties on China this year to 54 percent.
Following this, Beijing retaliated on Friday with 34% levies on all U.S. goods, which were matched by the latest duties by the Trump administration.
Chinese shares plunged and sovereign yields neared an all-time low with investors braced themselves for the fall-out of a spiraling trade conflict between the US and China, reported Bloomberg on Monday.
Chinese shares, listed in Hong Kong, tumbled 13.8 percent, putting it into a bear market, while Hong Kong’s Hang Seng Index had its worst day since 1997 as it wiped out all of its gains for the year.
The new tariff war led to shares of all 50 members of the Hang Seng China Enterprises Index decline, while gauge of Chinese tech stocks in Hong Kong fell more than 17 percent.
Among the names leading losses across Asia on Monday were Chinese bond issuers, with their investment-grade notes widening as much as 40 basis points, according to traders.
China strategist at Aletheia Capital Ltd, Vincent Chan, said to Bloomberg, “The global trade system for the past ninety years is collapsing, leaving it difficult for people to forecast the economic impact and tell where the bottom for a market is.”
With investors flocked to the safest assets available amid fears about how rising tariffs will impact China’s economy, government bonds surged. Amid a wave of buying at every major maturity, the benchmark 10-year yield slid eight basis points to near the lowest level on record.
The People’s Bank of China weakened its daily reference rate for the yuan to a level unseen since December, signalling Beijing is willing to support growth by devaluing its currency.
Wells Fargo & Co. analysts say there is a risk Beijing could deliberately weaken the yuan by up to 15% over a two-month period, however, those at Jefferies Financial Group Inc. has mooted the possibility of a 30% move.
The offshore yuan of China weakened around 0.2% against the dollar, even as the People’s Bank of China set the currency’s daily reference rate at a level much stronger than expected.
Chinese foreign ministry releases statement, condemns US’ move:
The Chinese foreign ministry, while stating the Chinese government’s position on opposing US abuse of tariffs, said in a statement on 5 April, “By taking such action (raising tariff), the United States defies the fundamental laws of economics and market principles, disregards the balanced outcomes achieved through multilateral trade negotiations, ignores the fact that the U.S. has long benefited substantially from international trade, and weaponizes tariffs to exert maximum pressure for selfish interests. This is a typical act of unilateralism, protectionism and economic bullying.”
The Chinese ministry added, “Under the guise of “reciprocity” and “fairness,” the United States is playing a zero-sum game to pursue in essence “America First” and “American exceptionalism.” It attempts to exploit tariffs to subvert the existing international economic and trade order, put U.S. interests above the common good of the international community, and advance U.S. hegemonic ambitions at the cost of the legitimate interests of all countries.”
The ministry also added that the US action will inevitably face widespread opposition from the international community.
No winners in trade or tariff wars:
Stating that there are no winners in trade or tariff wars, the Chinese foreign ministry added, “The United States should go along with the shared aspiration of the peoples of the two countries and the world, and, minding the fundamental interests of the two countries, stop using tariffs as a weapon to suppress China economically and stop undermining the legitimate development rights of the Chinese people.”
Chinese foreign ministry spokesperson Lin Jian requested countries to jointly oppose all forms of unilateralism and protectionism.
“All countries should uphold the principles of extensive consultation, joint contribution and shared benefit. They should practice true multilateralism, jointly oppose all forms of unilateralism and protectionism, and defend the U.N.-centered international system and the WTO-centered multilateral trading system. We are confident that the vast majority of countries, committed to fairness and justice, will stand on the right side of history and act in their best interests,” he said in a statement.
How Chinese economists react:
Supporting Chinese government’s move, Shanghai-based independent economist Andy Xie said, as CNBC quoted. “Raising tariff on all U.S. imports by the same amount as Trump’s latest tariff demonstrates China’s determination to go all the way to wherever the U.S. wants to be.”
“Beijing’s aggressive posture signals that future retaliation will be more forceful, setting off an escalatory spiral and raising the odds of unmanaged decoupling in 2025,” CNBC quoted a team of analysts at Eurasia Group said in a note.
Chief China economist at Morgan Stanley, Robin Xing, opined that China’s swift response could stunt the world’s second-biggest economy by 1.5 to 2 percentage points this year.
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