China 'not afraid of a trade war'

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China has said it does not want a trade war, but is "absolutely not afraid" of one, as it responds to tariffs announced by US President Donald Trump.

The tariffs on up to $60bn of Chinese products were announced on Thursday and are a response to allegations of intellectual property theft by China.

Beijing said it firmly opposed the new tariffs and that the US had "set a very bad precedent" with its move.

The US tariffs were "not conducive to global interests", China said.

In a statement issued on Friday, China's ministry of commerce also said it was "confident and capable of meeting any challenge".

"China will not sit idly by its own legitimate rights and interests. We are fully prepared to defend our legitimate interests," the ministry said.

But it said it hoped the US would not drag bilateral economic and trade relations into danger.

Markets in Asia tumbled on Friday as fears of a trade war escalated.

Japan's Nikkei 225 closed down 4.5% at 20,617.86 points, Sydney's S&P/ASX 200 lost 2% to finish at 5,820.7, while China's markets were all in negative territory in afternoon trade.

Earlier on Friday, China announced its own raft of proposed tariffs worth $3bn. Beijing said these were in response to US tariffs on steel and aluminium imports announced by Mr Trump earlier this month.

The US tariffs on steel and aluminium imports come into effect this week. Mr Trump has said these are needed to tackle "unfair" trade imbalances.

But China, which is the 11th biggest exporter of steel to the US, said it was considering measures "to balance out the losses caused to Chinese interests".

The commerce ministry said the list of products under consideration for its own tariffs includes pork, wine, fruit and nuts and stainless steel pipes.

It said it was planning two steps of retaliatory action:

Why is the US taking tariff action?

The US imports billions more goods from China each year than it exports, creating a deficit of about $375bn last year - which is what Mr Trump has railed against.

The president said on Thursday that he has asked China to cut that deficit by $100bn "immediately".

But the new US tariffs follow an investigation into Chinese policies ordered by Mr Trump in August.

The White House said this found a range of "unfair" practices in China, including restrictions on foreign ownership that pressured foreign companies into transferring technology.

The review also found evidence that China imposes unfair terms on US companies; steers investments in the US to strategic industries; and conducts and supports cyber attacks.

The White House said it had a list of more than 1,000 products that could be targeted by tariffs of 25%. Businesses will have the opportunity to comment before the final list goes into effect.

The US is also exploring ways to limit Chinese investment in the US and will seek to bring complaints about unfair licensing terms to the World Trade Organization, officials said.

America's top trade negotiator Robert Lighthizer said protecting US technology was critical to America's economic future.

Who are the potential losers in a trade war?

US officials had acknowledged the possibility of retaliation from China, but said the Asian giant ultimately had more to lose.

If imposed as described, the US tariffs could lead to higher costs for consumers, while China's retaliation would hit key sectors of the US economy including agriculture and aerospace, analysts say.

China was the third largest market for US exports in 2016 and among the biggest buyers of American corn, pork and aircraft.

China is also the world's biggest consumer of soybeans and consumes about one third of the US crop.

But in news which will come as a relief to US farmers, Friday's announcement did not include the soybeans.

Is there wider support in America for the plan?

Critics of Mr Trump's policies dismiss worries about the trade deficit, saying the exchange benefits both sides.

However, there is growing bipartisan concern in America about China's state-led economy and worry that China is seeking technology that could be deployed for military purposes.

Mr Trump's America First policy remains popular with large sections of the US public.

However, trade watchers in Asia says China's retaliation will not doubt be carefully targeted to hit key Trump-supporting areas of the US.

"The Chinese have been developing their list for more than a year and they are very good," said Deborah Elms, executive director of the Asian Trade Centre in Singapore.

"They may also add services companies that want to sell into China. If things get very nasty, they can also make life very difficult for US companies doing business in China. It's going to be very interesting."