Trump hits trade war accelerator with new tariffs
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Asia

Trump hits trade war accelerator with new tariffs

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US president Donald Trump took things up a notch with more tariffs on Chinese imports imposed on Monday, forcing China to retaliate. Meanwhile, his chief economic advisor said trade talks were still possible and BlackRock’s CEO said the US economy may actually benefit from trade war in the short term.

Trump has followed through on his recent threats against China and approved a new round of tariffs, effective by the end of the month, the White House stated on September 17.

"Today, following seven weeks of public notice, hearings, and extensive opportunities for comment, I directed the United States Trade Representative to proceed with placing additional tariffs on roughly $200bn of imports from China," Trump said in the statement. "The tariffs will take effect on September 24, 2018, and be set at a level of 10% until the end of the year. On January 1, the tariffs will rise to 25%. Further, if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267bn of additional imports.”

Despite recent news of a potential return of trade talks between China and the US, Trump did not seem convinced the Chinese had taken any of the steps he was expecting.

"For months, we have urged China to change these unfair [technology and intellectual property] practices, and give fair and reciprocal treatment to American companies," Trump added. “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices."

Larry Kudlow, Trump's economic adviser, said trade talks were still on the table despite the latest round of tariffs.

“We are ready to negotiate and talk with China any time that they are ready for serious and substantive negotiations toward free trade to reduce tariffs and non-tariff barriers, to open markets, to allow the most competitive economy in the world, ours, to export more and more goods and services to China,” Kudlow said in a speech on the same day as Trump's statement.

China's Ministry of Commerce responded to the tariffs by stating it would retaliate to “safeguard our legitimate rights, our interest, and the global free trade order”.

“We deeply regret this,” the ministry said in a statement on September 18.

The ministry also warned investors of potential future uncertainties the escalating trade war may bring. Hours later, China said it would impose new tariffs on $60bn of US goods, starting September 24, the same day when the US tariffs are set to take effect.

Larry Fink, chief executive officer of BlackRock, the world's biggest asset manager, said the US would benefit in the short term from the trade war, but was less positive on the long run impact.

“In the short run the United States is a big winner," Fink told a conference in New York. "The greatest problem that I see, and this is what I'm hearing from our clients, is this unilateralism that the United States has been taking.

"The world is probably less economically safe," he added. "One of the great foundations of the world — we all felt secure that this multilateralism would stabilise the world. Now that this multilateralism is breaking down, populism is rising, focusing on the individual needs of a country. Those issues could, and I'm not saying will, could create more volatility and could present greater problems."

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