Beijing has urged Washington “not to engage in blackmail” after US president Donald Trump asked his trade tsar to look at more than doubling proposed tariffs on $200bn in annual imports from China.
As the trade war between the world’s two largest economies intensifies, senior US administration officials said on Wednesday that Mr Trump had asked trade representative Robert Lighthizer to consider increasing the proposed tariffs to 25 per cent from the 10 per cent announced last month.
The proposed tariffs could not take effect before September and the Trump administration, which is facing a growing domestic backlash against its trade wars, stressed that they would still be subject to a public comment period and that no decision on whether to go ahead with them had been made.
In response, Geng Shuang, the Chinese foreign ministry spokesman, on Thursday urged the US “to correct its attitude and not to try to engage in blackmail. This does not work for China. We advise the US to return to reason and not to act in anger, which will ultimately hurt themselves.”
The spat sent Chinese shares down the most in a month on Thursday, with the CSI 300 index of shares listed in Shanghai and Shenzhen dropping as much as 3.6 per cent. Hong Kong’s Hang Seng index fell 2.6 per cent to the weakest level in 10 months.
The decision represented yet another sign that Mr Trump’s trade war with China was only just beginning and was likely to escalate significantly in the coming months. It drew condemnation from the tech and retail industries as well as farm groups concerned over the potential economic consequences.
Officials said Beijing’s decision to retaliate with its own duties against US tariffs on $34bn in imports from China already in place had left the Trump administration little choice but to consider applying further levies of its own and to look at raising the initial 10 per cent duty.
The latest step was “intended to provide the administration with additional options to encourage China to change its harmful policies and behaviour”, Mr Lighthizer said.
Officials denied the proposal was related to the recent devaluation of the renminbi, the Chinese currency, which has taken some of the bite out of US tariffs, citing “a whole range of things that make clear that [Chinese officials] aren’t interested in addressing all of the issues that we have raised”.
The move comes as officials continue low-level talks between Beijing and Washington aimed at hammering out the potential contours of higher-level negotiations, to which Mr Trump remains open.
But those discussions were now limited to “conversations about whether we are going to be able to have a fruitful negotiation or not”, one senior administration official told reporters.
Mr Trump is facing opposition from the US business community as well as farmers over his trade wars, with his administration revealing a $12bn aid programme last week to help farmers hurt by retaliatory tariffs. He is also confronting a growing backlash from members of his own Republican party in Congress over his decision to impose national security tariffs on key allies such as Canada and the EU, and his threats to extend them to auto imports.
Two Republican senators and a Democratic colleague on Wednesday introduced a bill that would restrict the president’s ability to use Section 232 to impose further tariffs in the name of national security by requiring both the Pentagon and Congress to sign off on any such move.
One congressional aide said there was more focus on pushing back against the 232 measures because of the widespread view on Capitol Hill that Canada and US allies in Europe were not a “national security” threat. But while there is serious concern about Mr Trump’s tariffs, the aide said there was less agreement over resisting the measures aimed at China because of a bipartisan consensus on the need to stand up to Beijing.
Another congressional aide said companies across the US were telling lawmakers that they were concerned about an escalating trade war but were afraid to speak out due to concerns that they would suffer the same fate as Harley-Davidson. The US motorcycle maker came under heavy fire from Mr Trump after it announced it was shifting production overseas because of retaliatory tariffs introduced by the EU.
Business groups on Wednesday were again vocal in their opposition to Mr Trump’s proposed escalation.
Jose Castaneda, a spokesman for the Information Technology Industry Council, said pushing ahead with the tariffs was “irresponsible, counterproductive and will only do more harm to Americans across the country”.
The National Retail Federation said the proposed increase in tariffs on a further $200bn worth of imports from China would result in higher costs that would hurt US consumers and companies more than China.
“Quite simply, there has been no better example of cutting off one’s nose in order to spite the face,” said Matthew Shay, the NRF’s president and chief executive.
Trump administration officials fired back that they were defending the future of the US economy from China’s theft of intellectual property and other unfair trading practices.
“The worst thing for the US economy, the worst thing for US workers, the worst thing for US consumers is going to be if China keeps doing what it is doing,” one senior administration official told reporters. “We are trying to get China to change behaviours that have been hurting us and hurting other countries around the world. And that’s going to be the best outcome for all of these people in the long run.”