China Signals Intent to Retaliate Against New US Tariffs

Aug 15, 2019
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The US-China trade war is showing no signs of slowing down, as China signaled today that it plans to retaliate against the US’ recently announced plans to extend its tariffs to another $300 billion in Chinese-made goods.

China said that the tariffs are a violation of the effective stalemate reached by US President Donald Trump and his Chinese counterpart Xi Jinping. China has not yet specified how it plans to retaliate against the US. Plans for a Chinese delegation to be in Washington in September are unchanged. China “has no choice but to take necessary measures to retaliate”, the State Council Tariff Committee said in a published statement.

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Trump announced the new tariffs this month that will hit as of September 1 after the White House accused Beijing of being a currency manipulator by allowing the RMB to weaken. This list of tariffs is the most consumer-facing to date, including most categories of electronics such as laptops, game consoles, and smartphones in addition to toys. Trump, however, recently announced that the imposition of tariffs on some consumer goods would be delayed until after the Christmas shopping season as a “gift” to consumers (and well after the September Back-to-School buying season). That being said, many non-consumer goods will still be hit with tariffs as of September 1.

What Goods Will be Hit With Tariffs in December?

Given how extensive the US-China trade relationship is, the list of goods being impacted by this set of tariffs is lengthy — yet specific. This set of tariffs that would come into place on December 15 would be the most consumer-facing, with smartphones, tablets, laptops and video game consoles being hit. But for all the everyday items, there are also some odd but important ones — saps and extracts of opium, wigs, basemetal forks, and hairpins — and ones that you wouldn’t expect such as religious pamphlets and materials.

In fact, the White House made a point to exempt bibles printed in China from both the September and December rounds of tariffs. According to Reuters, the value of bibles printed in China came to $91.7 million in 2018 out of a broader $794 million category of printed books, brochures and leaflets.

Tariffs and $BABA Earnings

Alibaba (NYSE:BABA) is expected to report earnings before the market opens on August 15. While many would expect the US-China trade war to cast a long shadow over the company’s earnings, considering its an extensive player in B2C e-commerce with Taobao and Tmall, analysts are still bullish on its prospects. 

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According to Refinitiv data, analysts expect revenue of $15.93 billion which would represent a 38% year-on-year rise, though this is less than the 61% growth seen in the same quarter last year. Alibaba’s e-commerce business specifically is expected to increase by 33% in the quarter, according to analysts polled by Factset. It should be noted that e-commerce shoppers in China would likely be buying mostly China-made goods thus would not be dramatically impacted by the tariffs. In fact, a surge of patriotism triggered by the trade war might only serve to increase the desire by Chinese to shop local.

 

Source: Bloomberg

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