Companies await China retaliation; weaker growth expected

Donald Trump

UBS economists said they believed Beijing might raise tariffs on $60 billion of USA goods and cancel an agreement to postpone a duty increase on imported American autos while the two sides negotiated.

The president claimed in one tweet that "the reason for the China pullback & attempted renegotiation of the Trade Deal is the honest HOPE that they will be able to "negotiate" with Joe Biden or one of the very weak Democrats".

The White House's top economic adviser has acknowledged that US consumers and businesses pay the tariffs that the Trump administration has imposed on billions of dollars of Chinese goods, even as President Trump himself insisted in a tweet, incorrectly, that China pays. He said officials might be anxious companies may shift operations out of China in response to "aggressive retaliatory actions". The United States is pressing China to change its policies on protections for intellectual property, as well as massive subsidies for state-owned firms, and to reduce the yawning trade deficit. "I don't know. That will take some time and then of course the president's going to have to make the final decision on that", Mr Kudlow said.

"The president and his administration have failed to realize we're stronger when we work with our allies on every issue - China included", she said on CNN's "State of the Union".

While supporters laud Trump as a tough negotiator, free-trade-minded Republicans have warned that the tariffs could do real damage to the economy, and many farmers - including Trump supporters - say the tariffs have hit their bottom line.

The last 5% of any trade talks is the most hard bit, says Miranda Carr, an executive director at Haitong Securities, which is a big Chinese financial services firm.

"At no time will China forfeit the country's respect, and no one should expect China to swallow bitter fruit that harms its core interests", the People's Daily, a newspaper controlled by the Chinese ruling Communist Party, said in a commentary on Monday. Additionally, Trump called for U.S. Trade Representative Robert Lighthizer to begin raising tariffs on "essentially all remaining imports from China, which are valued at approximately $300 billion". "Both sides will pay", Kudlow said, referring to China's expected losses in GDP due to "a diminishing export market".

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"Fair enough", Kudlow responded.

Two presidential hopefuls slammed President Trump for his approach to dealing with China, saying it doesn't appear he has a serious strategy.

The latest tariff hike increase extends 25 percent duties to a total of US$250 billion of Chinese imports, including US$50 billion already taxed at 25 percent before the new hike. "In fact, both sides will pay".

Kudlow broke with the president's long term, official line that Chinese exporters pay tariffs, however, a claim which has long since been debunked: tariffs are paid by importers to release a product from the dock at which they enter a country.

Over the weekend, Trump and his team of advisers took to social media and television to defend the tariff increase, which came into effect at 12.01pm on Friday.

"We would like to see these corrections in an agreement which is codified by law in China, not just a State Council announcement".

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