Kudlow: Squeeze won't ease; China preps more tariffs

China threatens tariffs on $60 billion in US goods

President Donald Trump has made the reduction of the U.S. trade deficit one of the key measures of success in his trade fights with China, the European Union, and Canada.

The Chinese Ministry of Commerce said it was "forced to do act" after Trump's threat earlier last week to raise a proposed tariff rate on US$200 billion worth of Chinese goods from 10 per cent to 25 per cent.

The latest round of United States tariffs would range between five percent and 25 percent and would hit 5,027 products - a variety of agricultural goods such as beef, as well as small planes, chemical components, textiles, liquefied natural gas and condoms.

Chinese officials have vowed to retaliate against any further USA measures, though they have also taken steps in recent weeks to shore up economic growth and have warned of the risks of job losses as a result of the trade war.

"The US and China have backup plans in areas like technology and agriculture, where they can look towards importing from third-party nations", Ye Tan, an independent Chinese economic analyst, told AFP.

"I sense that we're seeing a hardening of attitudes on both sides", said Jacob Parker, vice president of China relations at the U.S. China Business Council.

"China was forced to take the countermeasures" in response to a USA plan to raise tariffs to be imposed on 200 billion dollars of Chinese goods from 10 percent to 25 percent, the commission said in a statement.

Chinese state media on Monday lashed out at U.S. President Donald Trump's trade policies in an unusually personal attack, and sought to reassure investors anxious about China's economy as growth concerns rattled its financial markets. China retaliated in kind with duties on USA imports.

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The president said Sunday his tariffs are working and will lead to better trade deals for the United States. Another $16 billion in levies will likely follow in the coming days or weeks.

A commentary on the front page stated that Trump's eagerness for others to play along with his drama is "wishful thinking", pointing out that the United States had worsened the trade spat with China into a "zero-sum game".

Chinese officials are trying to reassure markets and the local population that the US moves would have little impact. "Their economy's weak, their currency is weak, people are leaving the country". Farmer groups have decried the trade tensions as soybean futures slumped.

Taking into full consideration the interests of its people and companies, as well as the global value chain, the Chinese government made the decision to impose differentiated tariff rates targeting $60 billion worth of USA goods. It is much more rational compared with the 25 percent tariff hikes threatened by the United States. which is a trade "stick", " said Li Yong, a senior research fellow at the China Association of International Trade.

US exports hit a record high in May as buyers stocked up on products before the tariffs.

A piece in the Global Times, a tabloid run by the People's Daily, described the retaliatory measures as "rational" and insisted China "will not rush to compete with USA numbers".

"Copper is a global market that depends much less on regional trade flows and therefore tariffs in any one region should not have a material impact on the market", Chris LaFemina, an analyst at Jefferies, said by telephone from NY.

Answering a reporter's question about what was specifically said on trade, Wang said: "We did not speak in such details".

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