Inkstone
    Mar
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    2018
    Mar
    23
    2018
    China hits back at US tariffs with a light jab, for now
    China hits back at US tariffs with a light jab, for now
    POLITICS

    China hits back at US tariffs with a light jab, for now

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    by
    Alan Wong and Xinyan Yu
    Alan Wong and
    Xinyan Yu
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    If this is what a trade war between the world's two-largest economies looks like, China’s counterpunch at the US was a light jab at best.

    Hours after President Donald Trump hit China with tariffs targeting about $60 billion in annual imports, Beijing announced on Friday what analysts said were “moderate” measures: tariffs on US imports worth roughly $3 billion. 

    Those measures include a 15% tariff on US steel pipes, fruits and wine, and a 25% tariff on pork and recycled aluminum.

    A light jab

    China tried to retaliate “without causing too much damage on the overall imports,” said Robin Xing, chief China economist at Morgan Stanley, in a conference call with reporters.

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    “Any big disruption on the import of agricultural goods may cause some inflationary pressure in China,” he said.

    Technically, Beijing is responding to the tariffs Trump announced earlier this month on steel and aluminum imports from China.

    The measures could be just the first of many more to come. On Friday, the prospect of an escalating trade war pummeled global stock markets.

    Group 5
    Fruits, nuts, steel scraps, pig parts… These are all foreign junk!
    -
    A commentator on Chinese social media

    But for now, China has limited the scope of tariffs to 128 American products, about half of them nuts and fruits. That amounts to a little more than 2% of US exports to China, which in 2017 totalled $130 billion, according to the US Census Bureau. 

    In comparison, Trump's planned tariffs will penalize more than 10% of China’s annual exports to the US.

    China's first response was seen a weak counterstrike even by some of its people.

    “Fruits, nuts, steel scraps, pig parts… These are all foreign junk!” said a commentator, who goes by the name “qingshanzhilong” on China's Twitter-like social media Weibo.

    Another said, “I’ve bought a hammer ready to smash US-made cars now.”

    Just days before China announced a 15% tariff on imported US wine, Californian wine sellers had pinned their growth hope on the expanding Chinese middle class.
    Just days before China announced a 15% tariff on imported US wine, Californian wine sellers had pinned their growth hope on the expanding Chinese middle class. Photo: AFP

    The damage

    Still, a jab is a jab.

    China's introduction of tariffs on imported US pork (25%) and wine (15%) will make these products less competitive than other foreign and local alternatives. 

    “Raising taxes on US-imported pork will certainly hurt pork producers in the US,” said Lv Guanghua, CEO of Zhushiji Pig Breeding Farm. China is the second-biggest importer of US pork after Mexico.

    And the 15% tariff on imported US wine will upset Californian wine makers who had pinned their hopes for growth on China. 

    Just earlier this week, the Wine Institute, an advocacy group for California's wine industry, issued a report saying that China was a top importer of US wine, citing its growing middle class and their adoption of “Western tastes.”

    The tariffs only add to the injury that Californian wine has never really taken off in China, where French wine is king with more than 40% of market share, according to Business France, a French government agency.

    “US wine is not popular in China,” Jim Boyce, the Beijing-based founder of wine site Grape Wall of China. “The reality is that the amount of US wine China consumed last year is lower than that of 2011, even though the size of the wine market has doubled here.”

    Midwestern states account for roughly half the US's agricultural output, making it a prime target in China's retaliation against US tariffs.
    Midwestern states account for roughly half the US's agricultural output, making it a prime target in China's retaliation against US tariffs. Photo: Reuters

    The punch

    China's initial response to Trump's tariffs on Chinese imports has one glaring omission: soybeans.

    China is the biggest importer of US soybeans, and any plan to impose tariffs on such imports could hit where it hurts: farmers in midwestern US states that helped elect Trump in 2016.

    But China also relies on imported soybeans for cooking oil and animal feed, and any move that would raise domestic food prices carries political costs locally.

    That pressure is why Xing, the Morgan Stanley economist, says China wanted to avoid disruption – at least for now.

    ALAN WONG
    ALAN WONG
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    Alan is editor at Inkstone. He was previously a digital editor for The New York Times in Hong Kong.

    XINYAN YU
    XINYAN YU
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    Xinyan is a senior multimedia producer at Inkstone based in Beijing. Previously, she was a producer at BBC News.

    ALAN WONG
    ALAN WONG
    arrow rightarrow right
    Alan is editor at Inkstone. He was previously a digital editor for The New York Times in Hong Kong.

    XINYAN YU
    XINYAN YU
    arrow rightarrow right
    Xinyan is a senior multimedia producer at Inkstone based in Beijing. Previously, she was a producer at BBC News.

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