US, China impose new tariffs on each other as talks resume

New York

THE US and China imposed fresh tariffs on each other's goods in the middle of trade talks aimed at averting the worsening conflict between the world's two biggest economies.

Both nations started levying the previously announced taxes on US$16 billion of imports from the other country shortly after noon Beijing time. China also said that it has lodged a complaint about the new American tariffs to the World Trade Organization, according to a Chinese Ministry of Commerce statement on its website.

The US will collect an additional 25 per cent in duties on Chinese imports ranging from motorcycles to steam turbines and railway cars, and the Chinese retaliation will see a similarly sized tax on items including coal, medical instruments, waste products, cars and buses.

US Treasury Undersecretary for International Affairs David Malpass and Chinese Vice-Commerce Minister Wang Shouwen met on Wednesday and will meet again on Thursday for the first face-to-face trade discussions since June. Those talks are not expected to draw in senior decision-makers and are predicted only to result in a joint statement of productive discussions, according to a person familiar with the agenda.

The Chinese state-run tabloid Global Times said in an editorial late on Wednesday that the Chinese delegation should not feel too much pressure over the outcome of talks. "To be honest, the Chinese society has no expectation that China and the US can quickly reach a deal to end the trade war," it said, adding that China was ready to endure the fallout from protracted trade tensions.

The meetings this week in Washington appear set to highlight the continuing divide inside the Trump administration over how best to deal with Beijing and how China hawks are winning that battle. While Treasury Secretary Steven Mnuchin is eager to find a negotiated solution, other cabinet members such as US Trade Representative Robert Lighthizer are keen to continue increasing the pressure on Beijing, analysts said.

Mr Trump recently revived a point of friction by accusing Beijing of manipulating its currency to offset the impact of his tariffs. In response, the Chinese delegation could this week offer a private pledge not to let the currency weaken further as long as negotiations continue, said Derek Scissors, a China specialist at the American Enterprise Institute in Washington. Such a commitment might lead to further discussions.

US Treasury officials have been working on a revised list of American demands in the lead-up to this week's meetings, according to people familiar with the US preparations. That effort, however, has been resisted by other parts of the Trump administration and it is unclear whether they will be ready to be presented to the visiting Chinese delegation.

The initial list of US demands presented to China in May included a call for a US$200 billion reduction in America's annual goods trade deficit with China by 2020 - which stood at about US$375 billion last year - and an end to industrial policies that the US claims violates global trading rules.

This week's talks are also taking place as hundreds of executives and officials from US companies, trade groups and other entities have descended on Washington to weigh in on the administration's planned tariffs on the additional US$200 billion in Chinese imports. Most have been asking for goods to be removed from the list of products. BLOOMBERG