China vows strong counter-measures after Trump's fresh threat on tariffs

China vowed to retaliate against US companies after President Donald Trump threatened to place tariffs on another $200 billion in Chinese imports, deepening a trade dispute between the world’s two biggest economies.

In an immediate rebuke to Trump, the Ministry of Commerce in Beijing said it would retaliate with "strong" counter measures. "If the US loses its sense and publishes such a list, China will have to take comprehensive quantitative and qualitative measures and retaliate forcefully," according to a statement from the ministry.

Markets soured on the news, with Asian stocks and US equity futures trading lower while safe havens including the yen, gold and Treasuries climbed.

In a White House statement Monday evening, Trump said that he had instructed the US Trade Representative’s office to identify $200 billion in Chinese imports for additional tariffs of 10 per cent. He said the US would impose tariffs on another $200 billion after that if Beijing retaliates.

“The United States will no longer be taken advantage of on trade by China and other countries in the world,” he said. “We will continue using all available tools to create a better and fairer trading system for all Americans.” 

The developments suggest a deepening trade dispute that the International Monetary Fund has described as one of the biggest risks to global growth. While the hit to growth around the world has so far been limited, the danger is that confidence and sentiment will soon start to sour and limit corporate expansion and investment plans.

"The US-China trade war is escalating rapidly," said Rajiv Biswas, Asia Pacific chief economist at IHS Markit in Singapore. "The collateral damage from an escalating US-China trade war will be widespread."

If implemented, Trump’s tariffs would mean a sizable amount of Chinese goods shipped to the U.S. would be exposed to new tariffs and raises questions about the impact on American consumers. Economists warn that higher prices on imported goods could dampen consumer sentiment and pressure inflation.

The US President last week threatened 25 percent tariffs on $50 billion in Chinese products. and said at the time he would impose even more duties if China retaliated.

One Fed president is concerned about the growing spat China’s threat “clearly indicates its determination to keep the United States at a permanent and unfair disadvantage,” Trump said Monday. “This is unacceptable. Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship.”

The latest salvo came as Trump seeks to convince US lawmakers to let Chinese telecom company ZTE Corp. remain in business. Earlier this month, the Trump administration gave ZTE a reprieve after the company agree to pay fines, change management and agree to American oversight. ZTE’s survival has been a key goal of Chinese President Xi Jinping.

The Senate passed legislation on Monday evening that would restore penalties on ZTE.

The US imported $505 billion of goods from China last year and exported about $130 billion, leaving a 2017 trade deficit of $376 billion, according to US government figures. The fact that America imports more from China will make it harder for Beijing to match Trump’s attacks, according to Derek Scissors, a resident scholar at the conservative American Enterprise Institute in Washington who focuses on China.

“All they can do is impose higher tariffs on a smaller subset of products,” he said. That being said, “China is going to retaliate,” he added.