China: US tariffs will hit intl. supply chains

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While the Trump administration prepares to deliver another round of punitive tariffs on $34 billion of Chinese imports on Friday, China has promised retaliation but assured markets that it will not "fire the first shot".

"China will not bow in the face of threats and blackmail, nor will it be shaken in its resolve to defend global free trade", said ministry spokesman Gao Feng at a news conference.

Economists have for months warned of the potential damage to the U.S. and global economies from aggressive trade policies that evolve into protectionism, which would raise prices and upend global supply chains.

"On the US's so-called list of $34 billion in taxable products, about $20 billion or 59 percent of them, are made by foreign invested enterprises, with American companies representing a significant portion", said Gao.

"All we can do is adjust our supply chain here depending on the size of the price increases".

Trump said that should China not make fundamental changes to its economy and cut down on IP theft, the USA would hit another $200 billion worth of Chinese imports with a 10% tariff.

The first wave on US tariffs on $34bn of Chinese exports will take effect on July 6, according to a statement from the US Trade Representative, which didn't specify a time. In the scenario where the United States and China just stick to this round of tariffs - $50bn of imports - and go no further, then the drag on China's economy would be 0.2% point of growth in 2019, according to Bloomberg Economics' calculations.

"Escalating tariffs against the United States does nothing to help Canada".

Fears over the impact of the trade clash have rattled markets around the world, with China's stocks and currency coming under particular pressure in recent weeks.

Chinese retailers told Reuters they probably would raise prices or spurn USA imports for domestic substitutes, which could eventually hurt their businesses.

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"With these stories coming out (about vehicle tariffs), you have a sector which has been very oversold meeting some potential good news on the trade war front", said Bank of America Merrill Lynch European equity strategist James Barty.

"The Chinese government's position has been stated many times".

One U.S. manufacturer said Chinese authorities on average used to inspect 2 percent of the vehicles it sent overseas.

"There is a chance the company will lose money and might go bankrupt", said Tong.

"Washington can not contain China's growth through a trade war", read the headline of an editorial Thursday in the Global Times, a party newspaper.

Beijing will hit back with tariffs initially on almost US$30 billion in U.S. goods, also taking effect Friday, including vehicles and many agricultural and food products, such as soybeans, which will hit United States farmers hard.

The Washington Post reported on Wednesday that United States companies had already felt Beijing's sting "in the form of stalled product approvals, worker visas and licensing applications".

Xi's government has expressed confidence China can hold out against US pressure, but companies and investors are uneasy.

They also worry the sparring between Washington and Beijing could fuel anti-American sentiment among Chinese consumers.

"An open trade war with the USA, which now seems imminent, would put a damper on China's push to straighten up its economy and to increase its global economic and geopolitical influence", Prasad said.

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