China can draw lessons from first trade war in tariffs countdown
China has a range of new tools at its disposal if it chooses to up the ante
HOURS before higher US tariffs go into effect, the timeline of China’s countermeasures during Donald Trump’s first trade war still offers the best clues to what happens next.
Since Trump announced a 10 per cent levy on all Chinese exports, Beijing’s relatively restrained response so far is largely taking a page from a playbook used before, when it typically retaliated with reciprocal measures only after tariffs became law.
The standoff this time will not necessarily follow the same script, especially as a spiralling confrontation could put the hobbled domestic economy into an even more precarious spot. China now exports fewer products directly to the US while relying on countries such as Brazil for some farm imports it used to get from America. China also has a range of new tools at its disposal if it chooses to up the ante.
The new duties are set to kick in on Tuesday (Feb 4) during the last day of the weeklong Chinese New Year holiday, injecting more uncertainty into the timing of any response from Beijing.
Under the glare of public opinion, Chinese officials will likely find it hard not to counter Trump’s first move in some way. But as the country’s former central bank governor, Yi Gang pointed out in December, avoiding a retaliation might just be the best answer to Washington’s tariff threats and export controls.
Timeline of some tit-for-tats during first trade war:
Mar 23, 2018: The US imposed a 25 per cent tariff on all steel imports and a 10 per cent tariff on all aluminium imports, except those from the European Union and several countries.
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Response: China on the same day announced plans to impose tariffs ranging from 15 to 25 per cent on US$20 billion worth of US products, which were implemented on Apr 2.
Apr 3, 2018: The US released an initial list of products worth US$50 billion subject to a potential 25 per cent tariff.
Response: A day later, China’s Commerce Department raised the case to the WTO, and vowed “reciprocal measures of equal strength and scale against US products”. On the same day, a State Council body proposed 25 per cent tariffs to be applied on products of the same value. While both lists would shrink later, they were still implemented in the first round of tariffs.
Apr 16, 2018: The US Department of Commerce concluded that Chinese telecoms giant ZTE violated sanctions, and banned American companies from doing business with it for seven years.
Response: A day later, China announced temporary anti-dumping measures on US sorghum imports.
Aug 1, 2018: The US Trade Representative’s office said it was considering a 25 per cent tariff – rather than a 10 per cent levy – on US$200 billion worth of Chinese commodities in a third batch of tariffs.
Response: The following day, China’s Commerce Ministry said it was fully prepared and had to retaliate. Then China proposed tariffs ranging between 5 per cent and 25 per cent on US$60 billion worth of US products.
Aug 23, 2018: The US started implementing a second round of tariffs with a 25 per cent levy on US$16 billion of imports.
Response: China reciprocated with a 25 per cent additional tariff on US$16 billion of US exports, effective the same day.
Sep 18, 2018: In the third round of tariffs, the US announced a 10 per cent tariff on US$200 billion worth of Chinese goods, with the rate to be increased to 25 per cent by Jan 1, 2019.
Response: On the same day, China said it “would have to take countermeasures in sync”, and announced it will impose tariffs on US$60 billion worth of US goods. On Sep 22, China also cancelled trade talks planned with the US.
May 10, 2019: The rate for the third round of US tariffs is raised from 10 to 25 per cent following a delay for trade negotiations, after both sides failed to reach a deal.
Response: China said it regretted the move and vowed to take all necessary countermeasures. On May 13, China came back with tariff hikes on US$60 billion worth of US goods.
May 16, 2019: The US placed Huawei Technologies on its so-called Entity List, which restricts companies’ access to American technology.
Response: China announced plans to establish its own version of the list on May 31.
Aug 1, 2019: After a period of relative peace amid trade talks, Trump said in a surprise statement that the US will start imposing 10 per cent tariffs on another US$300 billion of products from China.
Response: Beijing let its currency sink to the lowest level in 11 years in an apparent retaliation.
Aug 6, 2019: The Treasury declared China a currency manipulator.
Response: Beijing announced on the same day that certain Chinese companies have suspended their purchases of US agricultural products.
Aug 13, 2019: The US unveiled tariffs on US$300 billion worth of Chinese goods.
Response: Beijing struck back by announcing its own levies on Aug 23. BLOOMBERG
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