Trump could raise tariffs further on Chinese goods

Also a second round of tariffs on products worth $16billion could take effect as soon as this week

Also a second round of tariffs on products worth $16billion could take effect as soon as this week

Chinese equities and the yuan extended losses Wednesday afternoon, gaining downward momentum as concern over possible higher US tariffs overwhelmed optimism about Beijing's pledge to support economic growth.

"On June 18, the president directed me to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent, in response to China's decision to cause further harm to US workers, farmers, and businesses by imposing retaliatory duties on USA goods", Lighthizer said.

China's Foreign Ministry spokesperson Geng Shuang said China was standing firm on its course of action over the US-China trade conflict.

China's government, however, shows no sign of bending to Washington's pressure.

"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. After Liu visited Washington later that month, the nations released a joint statement pledging to reduce the US trade deficit with China, among other things.

A further escalation of the dispute would be a threat to world trade as a whole.

Investors fear an escalating trade war between Washington and Beijing could hit global economic growth, and prominent US business groups, while tired of what they see as China's mercantilist trade practices, have condemned Trump's aggressive tariffs. The rising tensions between the two nations have weighed on stock and currency markets, with the Chinese yuan falling against the dollar.

Recognizing this dynamic, a policymaker who is serious about reducing the USA trade deficit would at least consider controlling capital inflows to the United States, either by creating regulations that make it more hard for foreigners to invest in the US, or by taxing such investment. The Mexicans, for example, targeted USA pork and cheese.

But President Donald Trump now wants the U.S. Trade Representative to consider more than doubling those tariffs to 25 percent.

FILE PHOTO: Shipping containers, including one labelled "China Shipping", are stacked at the Paul W. Conley Container Terminal in Boston, Massachusetts, U.S., May 9, 2018.

German companies are now considering closing or relocating their production sites to other countries, in a bid to avoid higher costs due to raising tariffs.

The move comes as the USA and China are tangled in a trade dispute, after President Donald Trump announced earlier this year that the U.S. would apply punitive tariffs on steel and aluminum worldwide, and then moved to add tariffs on other Chinese goods. Beijing retaliated with matching tariffs on the same amount of USA exports to China.

Chinese officials said they were prepared to retaliate again with higher tariffs of their own.

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.

"Well, let's put it into arithmetic perspective". The goods in the amount of $200 bln represent nearly the half of USA imports from China and about 10% of total US imports per year.

The U.S. imposed 25 percent tariffs on $34 billion of Chinese products earlier this month, with plans to add another $16 billion of imports on Tuesday. The U.S. exports goods to China amounting to $130 bln, so it is unlikely that it will be able to respond with a proportionate expansion. Since then there have been no meaningful contacts between the two sides. "First, we advise the United States side to correct its attitude and not to try to engage in blackmail", China's foreign ministry spokesperson Geng Shuang said on Thursday.

"We would advise the United States to correct its attitude and not try to engage in blackmail. This won't work on China", Geng was quoted by Reuters as saying. Advisers reportedly told President Trump that China's authorities would be more likely to yield if higher tax rates were imposed.

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