China unveils proposed tariffs on $60 billion of U.S. goods in latest trade war salvo

BEIJING/SINGAPORE (Reuters) – China proposed retaliatory tariffs on $ 60 billion worth of U.S. goods ranging from liquefied natural gas (LNG) to some aircraft on Friday, as a senior Chinese diplomat cast doubt on prospects of talks with Washington to solve their bitter trade conflict given current U.S. behavior.

The Trump administration ratcheted up pressure for trade concessions from Beijing this week by proposing a higher 25 percent tariff on $ 200 billion worth of Chinese imports. China immediately vowed to retaliate though at the same time urged the U.S. to act rationally and return to talks to resolve the dispute.

The United States and China implemented tariffs on $ 34 billion worth of each others’ goods in July. Washington is expected to soon implement tariffs on an additional $ 16 billion of Chinese goods, which China has already announced it will match immediately.

China has now either imposed or proposed tariffs on $ 110 billion of U.S. goods, representing the vast majority of China’s annual imports of American products. Last year, China imported about $ 130 billion of U.S. goods.

China’s finance ministry unveiled new sets of additional tariffs on 5,207 goods imported from the United States, with the extra levies ranging from 5 to 25 percent.

Timing will depend on the actions of the United States, the Chinese Commerce Ministry said in a separate statement.

“The U.S. side has repeatedly escalated the situation against the interests of both enterprises and consumers,” the Commerce Ministry said in its statement.

“China has to take necessary countermeasures to defend its dignity and the interests of its people, free trade and the multilateral system.”

Representatives for the White House and the U.S. Commerce Department did not immediately reply to requests for comment on China’s retaliatory move.

TENSIONS WEIGH ON CHINESE MARKETS

The United States alleges that China steals U.S. corporate secrets and wants it to stop doing so, and is also seeking to get Beijing to abandon plans to boost its high-tech industries at America’s expense. Washington also wants China to stop subsidizing Chinese companies with cheap loans, claiming that this allows them to compete unfairly.

U.S. President Donald Trump has said he is determined to reduce the large U.S. trade deficit with China.

Trump, who has accused China and others of exploiting the United States in global trade, has demanded that Beijing make a host of concessions to avoid the new duties on $ 200 billion of Chinese goods, which could be imposed in the weeks after a comment period closes on Sept. 5.

China says the United States is deliberately creating the trade conflict, using bullying tactics, and ignoring international negotiating norms so that it can stop the rise of China as an competitor on the world stage.

The rising tensions have weighed on Chinese stock and currency markets, with the Chinese yuan falling against the dollar.

TOP DIPLOMATS MEET

White House economic adviser Larry Kudlow warned China after it announced the latest retaliatory tariffs, saying Beijing should not underestimate Trump’s determination to act on trade.

“They better not underestimate the president,” Kudlow said in an interview on Fox Business Network.”He (Trump) is going to stand tough … They better not assume anything. The president is not about to back down. And the best news, I think, is we are coming together with the European Union to make a deal with them, so we’ll have a united front against China and, I think, most of our trade team would tell you, we’re moving close on Mexico. So, this unifies NAFTA and U.S.-Europe, Australia, Japan – China is increasingly isolated with a weak economy.”

Kudlow added: “We will not let China steal our technology. We will not.”

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

The two countries have not had formal talks on the trade dispute since early June.

Still, two senior diplomats did meet earlier on Friday, on the sidelines of a regional summit in Singapore.

China is willing to resolve differences with the United States on an equal footing, the Chinese government’s top diplomat said after meeting U.S. Secretary of State Mike Pompeo, but added they did not address their trade war too specifically.

“We are willing to resolve the concerns of both sides via talks on the basis of an equal footing and mutual respect. He (Pompeo) was accommodating on this as a direction, and said that he does not want current frictions to continue,” said State Councillor Wang Yi, who is also China’s foreign minister.

Answering a reporter’s question about what was specifically said on trade, Wang said: “We did not speak in such details. But actually, as journalists have noted, how can talks take place under this pressure?”

However, Kudlow said there has been some communication “at the highest level” on trade between the United States and China in recent days.

CONDOMS AND COFFEE

Among U.S. products targeted in the latest Chinese salvo were a wide range of agricultural and energy products, such as liquefied natural gas. LNG’s inclusion marks a deployment by Beijing of one of its last major weapons from its energy and commodities arsenal in its fight with Washington.

The market is not large by value compared with approximately $ 12 billion of U.S. crude that came to China last year, but LNG imports could shoot up as Beijing forges ahead with its plan to switch millions of households to the fuel away from coal as part of its battle against smog.

Morgan Stanley has estimated annual Chinese imports of U.S. LNG could rise to as much as $ 9 billion within two or three years, from $ 1 billion in 2017. The amount could be even larger if the United States resolves a logistics bottleneck.

“As the total value of goods under tariffs shoots up, China has little choice but to use LNG and others to top up the value,” said Lin Boqiang, professor on energy studies at China’s Xiamen University.

“The U.S. gas industry will be much harder hit by this as China imports only a small volume whereas U.S. suppliers see China as a major future market.”

Other U.S. goods targeted by China in the latest list include semiconductors, some helicopters, small-to-mid-sized aircraft, condoms, iron ore, steel products, roasted coffee, sugar, foods containing chocolate, candies, and even car windscreens.

The United States was the fourth largest supplier of foreign chocolate products to China in 2017, worth around $ 24 million, after Italy, Russia and Belgium, according to customs data. China’s growing sweet tooth is seen as a big sales opportunity for international makers of cookies and chocolate bars like Mars and Hershey (HSY.N).

Small and medium sized planes were on the list of goods that would be slapped with an additional 5 percent tariff. However, the list did not specify a weight range or other details on the aircraft. Helicopters with an empty weight of less than 2 tonnes were also on that list.

China’s biggest U.S. imports by value in 2017 were aircraft and related equipment, soybeans and autos.