BEIJING/WASHINGTON, (Reuters) – China hit back quickly on Wednesday against US plans to impose tariffs on $50 billion in Chinese goods, retaliating with a list of similar duties on key American imports including soybeans, planes, cars, beef and chemicals in a move that sent global markets reeling.
Beijing moved with exceptional speed after US President Donald Trump’s administration unveiled tariff plans targeting China, acting less than 11 hours later as the trade dispute between the world’s two economic superpowers sharply escalated.
US President Donald Trump, who has long charged that his predecessors served the United States badly in trade matters, rejected the notion that the tit-for-tat moves amounted to a trade war.
“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US,” Mr Trump wrote in a post on Twitter early on Wednesday.
The latest developments sent shivers through global stock markets and commodities.
Shares in US exporters of everything from food to planes were hammered with a list of duties on key US imports including soybeans, planes, cars, beef and chemicals.
By mid-morning in New York, shares in US aerospace giant Boeing Co were down 3.3 percent while agricultural machinery maker Deere & Co had slipped 3.9 percent. The Dow Jones Industrial Average was down 0.91 percent while the S&P 500 fell 0.59 percent. The US dollar also fell.
While Washington targeted products that benefit from Chinese industrial policy, including its “Made in China 2025” initiative to replace advanced technology imports with domestic products in strategic industries such as advanced IT and robotics, Beijing’s appeared aimed at inflicting political damage.
For example, the US farm belt strongly backed Trump in the 2016 US election.
Because the actions will not be carried out immediately, there may be room for maneuver. Publication of Washington’s list starts a period of public comment and consultation expected to last around two months. The effective date of China’s moves depends on when the US action takes effect.
US Commerce Secretary Wilbur Ross said in an interview with CNBC that it would not be surprising if the US and China trade actions led to negotiations, although he would not speculate on when this might happen.
Investors were wondering, nonetheless, how far one of the worst trade disputes in many years could escalate.
“The assumption was China would not respond too aggressively and avoid escalating tensions. China’s response is a surprise for some people,” said Julian Evans-Pritchard, senior China economist at Capital Economics, noting that neither side had yet called for enforcement of the tariffs.
“It’s more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force,” said Mr Evans-Pritchard.
US-made goods that appear to face added tariffs in China based, on an analysis of Beijing’s list, include Tesla Inc electric cars, Ford Motor Co’s Lincoln auto models, Gulfstream jets made by General Dynamics Corp and Brown-Forman Corp’s Jack Daniel’s whiskey.
Unlike Washington’s list, which was filled with many obscure industrial items, China’s list strikes at signature US exports, including soybeans, frozen beef, cotton and other key agricultural commodities produced in states from Iowa to Texas that voted for Mr Trump in the 2016 presidential election.
Information technology products, from cellphones to personal computers, largely escaped the latest salvo of US-China trade measures despite accounting for a significant portion of bilateral trade.
China ran a $375 billion goods trade surplus with the United States in 2017. Mr Trump has demanded that the China cut the trade gap by $100 billion.
Beijing’s action extended to tobacco and whiskey, both produced in states including Kentucky, home of US Senate Majority Leader Mitch McConnell, like Mr Trump a Republican.
“China is also trying to weaken our will by targeting certain segments of our economy,” White House trade adviser Peter Navarro said in an interview with National Public Radio.
“But let’s remember: we buy five times more goods than they buy from us. They have a lot more to lose in any escalation in this matter.”
Beijing’s list of 25 percent additional tariffs on US goods covers 106 items with a trade value matching the $50 billion targeted on Washington’s list, China’s commerce and finance ministries said.
“This is a real game changer and moves the trade dispute away from symbolism to measures which would really hurt U.S agricultural exports,” said Commerzbank commodities analyst Carsten Fritsch.
China’s tariff list covers aircraft that would likely include older models such as Boeing Co’s workhorse 737 narrowbody jet, but not newer models like the 737 MAX or its larger planes.
Hours earlier, the US government unveiled a detailed breakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25 percent duties, ranging from light-emitting diodes to machine parts.
The US move, broadly flagged last month, is aimed at forcing Beijing to address what Washington says is deeply entrenched theft of US intellectual property and forced technology transfer from US companies to Chinese competitors, charges Chinese officials deny.
Foreign ministry spokesman Geng Shuang said China had shown sincerity in wanting to resolve the dispute through negotiations.
“But the best opportunities for resolving the issues through dialogue and negotiations have been repeatedly missed by the US side,” he told a regular briefing on Wednesday.
The tariff list from the office of US Trade Representative Robert Lighthizer followed China’s imposition of tariffs on $3 billion worth of US fruits, nuts, pork and wine to protest US steel and aluminum tariffs imposed last month by Mr Trump.