A man walks past an electronic board displaying Japan's 10-year government bonds level, the current Japanese Yen exchange rate against the U.S. dollar and Nikkei share average, in Tokyo.
Image: Reuters
Joe Cash and Nicoco Chan
China vowed on Tuesday to "fight to the end" against US tariffs as some citizens railed against President Donald Trump after he singled out Beijing for further levies, setting the stage for a standoff between the world's top two economies.
If Trump sticks to his plan for an additional 50% tariff on China unless it withdraws its retaliatory levies on the US, total new U.S. duties on Chinese goods this year could rise to 104% by Wednesday.
Trump's previous tariff increases are already squeezing Chinese exporters' margins to the point of suffocation so further hikes would only serve to underscore Washington's appetite for brinkmanship and its desire to cut China out of the world's biggest consumer market as a matter of principle, analysts say.
But with global supply chains in jeopardy, Beijing is under pressure to respond as President Xi Jinping prepares to meet Spain's prime minister, and begin a tour of Southeast Asia.
"The US side's threat to escalate tariffs against China is a mistake on top of a mistake, once again exposing the American side's blackmailing nature," the commerce ministry said in a statement.
"If the United States insists on having its way, China will fight to the end."
Trump said he would impose the additional 50% duty on US imports from China on Wednesday if Beijing did not withdraw the 34% tariffs it imposed on US products last week.
The Chinese levies had come in response to "reciprocal" duties of 34% announced by Trump, on top of tariffs of 20% imposed earlier this year, lifting to 76% the average US tariff on Chinese goods.
"If the tariffs keep going up and up, it becomes a battle of wills and principles rather than economics," said Xu Tianchen, a senior economist for China at the Economist Intelligence Unit.
"Since China already faces a tariff rate in excess of 60%, it doesn't matter if it goes up by 50% or 500%," he added.
China has stepped up efforts to shield its economy from global market turmoil following Trump's announcement.
On Tuesday, China's state planner said it had met domestic private firms, including Trina Solar, ride-hailing company Didi, and Goertek to hear suggestions on how to deal with the aditional duties.
While several state holding companies pledged to increase share investment, a slew of listed companies unveiled buybacks, and the central bank pledged liquidity support for fund Central Huijin after it intervened to support sinking stocks.
But there is no escaping the fact that Trump's affinity for tariffs risks derailing China's largely export-led economic recovery given that no other country comes close to the consumption power of the US, where Chinese producers sell more than $400 billion worth of goods annually.
The Chinese people "do not provoke trouble, nor are we afraid of it," Lin Jian, a spokesperson for China's foreign ministry, told a regular press conference.
"The Chinese people's legitimate right to development must not be deprived," he added.
Targeting China
Trump's tariffs will be felt particularly keenly as they target the two main strategies Chinese exporters have used to blunt the impact of the trade war: shifting some production abroad and boosting sales to non-US markets.
Dan Wang, a China expert at Eurasia Group, said Trump had effectively already wiped out Chinese exporters' profits once U.S. import duties passed the 35% mark.
"After that, China shouldn't export to the US at all. It could be 1 000%, but since there is no trade, there is no harm."
"Europe is and will be the most profitable market for China now," she added.
Xi is expected to meet Spain's Prime Minister Pedro Sanchez on Friday, with the agenda likely to cover finding a resolution to trade tension with Brussels over China's electric vehicle exports, as well as Trump's broader tariff onslaught.
The Chinese leader will then visit Malaysia, Vietnam and Cambodia, three economies that gained from relocation by Chinese manufacturers to avoid US sanctions during Trump's first term, but which now face steep levies of their own.
REUTERS
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