SINGAPORE (ICIS)--US President Donald Trump’s administration unveiled a new list of tariffs on Chinese goods worth $200bn late on Tuesday, unleashing a new threat in an escalating trade war that has the whole world worried, rattling markets on Wednesday.
China vowed to fight back.
“China is shocked and will be forced to take countermeasures as usual to defend its own interests,” the country’s Ministry of Commerce said in a statement.
“We call on the international community to work together to safeguard free trade rules and multilateral trading systems and jointly oppose trade bullying,” it added.
As the two largest economies of the world traded punitive tariffs, Asian equities tumbled, led by the China’s stocks, with its currency – the yuan (CNY) – again depreciating against the US dollar.
China’s SSE (Shanghai Stock Exchange) composite index fell 49.85 points or 1.76% to close at 2,777.77.
The Chinese yuan was trading against the US dollar at CNY6.66 in the afternoon.
At 8:00 GMT, Brent crude was down $1.57/bbl at $77.29/bbl, while US crude fell 56 cents/bbl to $73.55/bbl.
Late on Tuesday, the US administration announced a two-month public review of the list of Chinese products identified on which a new 10% duty will be imposed, with hearings to be held on 20-23 August.
“For over a year, the Trump Administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” US trade representative Robert Lighthizer said in a statement.
“China has not changed its behavior -- behavior that puts the future of the US economy at risk. Rather than address our legitimate concerns, China has begun to retaliate against US products. There is no justification for such action,” he said.
US tariffs on $34bn worth of Chinese goods took effect on 6 July, prompting China to respond with the same scale and intensity, effectively triggering a trade war between the world’s two biggest economies.
China’s retaliatory tariffs cover 545 US products, which will include agricultural products such as corn and soybeans.
The second set of US tariffs, involving $16bn of Chinese goods, is expected to take effect later this month.
Products under consideration for the second set include polyethylene (PE), polyvinyl chloride (PVC), polycarbonate, and polyamide alongside propane, LPG and hydrocarbon gases, naphtha, crude benzene, toluene and xylenes, and crude oil.
China’s retaliation to the initial set of US tariffs has prompted it to modify the initial action, according to the latest notification by the Office of the US Trade Representative (USTR).
“The proposed modification is to maintain the original $34bn action and the proposed $16bn action, and to take further action in the form of an additional 10% ad valorem duty on products of China with an annual trade value of approximately $200bn,” it said.
The new all-encompassing list released by USTR includes finished and raw products with diverse specifications.
Chemicals with certain classifications include benzene, toluene, all sorts of xylenes, phenols, naphtha, ethane, butane, styrene, ethylbenzene, cumene, ethyl chloride, methyl chloride, vinyl chloride, methanol, propane, butane, ethylene glycol, and methyl tertiary butyl ether (MTBE).
The list also contains certain classifications of acetone, acetic acid, ethyl acetate, vinyl acetate, fatty acids, acrylic acid, adipic acid, melamine, methyl di-p phenylene isocyanate (MDI), acrylonitrile-butadiene rubber (NBR), polypropylene (PP) yarn and caustic soda.
Similarly, the 10% tariff is also proposed on liquefied natural gas, liquefied propane, liquefied butanes, and liquefied ethylene, propylene, butylene and butadiene.
Emerging Asian currencies scrambled for cover on renewed trade war fears this morning, DBS Research said in a note.
“The tariff news was also ill-timed for investors hoping for a trade war respite to capitalize on the expected stream of strong US corporate earnings. Instead, futures are now looking for the major US stock indices to open 0.8-0.9% lower later tonight.
“Overall, Trump reminded markets that US-China trade tensions are likely to escalate ahead of the US mid-term elections in November. Our view remains for the USD [US dollar] to be underpinned for the rest of the year,” it added.
By Tahir Ikram
Additional reporting by Fanny Zhang, Pearl Bantillo and Joey Chua
(Recasts with China reaction. This is a developing story with more to follow.)
Picture: US President Donald Trump (Source: REX/Shutterstock)