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Global factory growth slowing; China-U.S. trade war biting

04 August 2018

Aerial view of containers at a loading terminal in the port of Hamburg, Germany August 1, 2018.

"We said before that this round of tariffs amounted to doubling down on the recklessness of imposing trade policy that will hurt USA families and workers more than they will hurt China", said Matthew Shay, president of the National Retail Federation.

Erin Ennis, senior vice president of the US China Business Council, said a 10 per cent tariff on these products is already problematic, but more than doubling that to 25 per cent would be much worse.

Mr Wang was firm that any pressure which the USA was trying to put on China would not work.

Geng gave no indication whether the two sides were preparing to resume negotiations.

Due to the trade imbalance between the nations, China can not place tariffs on $200 billion worth of US imports on top of an already announced $50 billion, because it does not import that many goods from the U.S.

"If we're going to use tariffs, this gives us more flexibility and it's a more meaningful threat", he said, adding that Trump's pressure strategy will not work if he does not resolve trade disputes with USA allies such as the European Union, Mexico and Canada. Those tariffs have already started to affect some businesses, though only a small fraction of the USA economy is experiencing consequences. On Friday, the Ministry of Commerce described its planned response: four different types of tariffs on $60 billion of US goods.

President Donald Trump has asked U.S. Trade Representative Robert Lighthizer to consider hiking the duties, which could be implemented as early as next month.

Stock markets edged up globally on Tuesday on a report that the United States and China were seeking to resume talks to defuse the budding trade war.

The duties could take effect after the administration draws up its revised, final list of imports following a public comment period.

In early July, the USA government imposed 25 per cent tariffs on an initial $34 billion of Chinese imports.

"We would advise the United States to correct its attitude and not try to engage in blackmail".

"The data breakdown indicates that an uncertain demand outlook amidst the U.S".

In Beijing Chinese foreign ministry spokesman Geng Shuang said Wednesday that "blackmail and pressure from the USA side will never work on China".

The Donald Trump administration claims the tariffs are necessary to protect national security and USA businesses' intellectual property, and to reduce the country's trade deficit with China. The plan to more than double the tariff rate was first reported by Bloomberg News.

The proposal would require a more robust justification from the Department of Defense for "Section 232" tariffs such as those imposed on steel and aluminum imports and those now under consideration for autos.

The Financial Times estimates that should countries retaliate, the value of trade covered by the measures and countermeasures could reach more than $1 trillion (some 6% of world trade), which would derail global growth.

The move signals displeasure among Trump's own party over his protectionist actions, but chances of it becoming law are slim as Congress would likely need to override a presidential veto by Trump.

Global factory growth slowing; China-U.S. trade war biting