US raises import tariffs on China: Update 2

Adds tweet from President Trump about trade talks

The US has raised tariff rates on $200bn/yr of imports from China as the latest round of talks between the two sides failed to produce an agreement.

The tariffs were increased to 25pc from the previous rate of 10pc at 12:01am ET (12:01pm Beijing time) today.

China "deeply regrets that it will have to take necessary countermeasures", the Chinese commerce ministry said immediately after the higher tariffs took effect, without giving more details. Beijing has responded in kind to previous US tariff increases, raising the prospect that it will impose 25pc tariffs on a range of US imports, including LNG.

The latest talks between Chinese vice-premier Liu He and US trade representative Robert Lighthizer and treasury secretary Stephen Mnuchin concluded shortly before noon today in Washington. President Donald Trump left open the possibility that the tariff hike may be reversed depending on the outcome of future negotiations, including with his Chinese counterpart, Xi Jinping.

"Over the course of the past two days, the US and China have held candid and constructive conversations on the status of the trade relationship between both countries. The relationship between President Xi and myself remains a very strong one, and conversations into the future will continue. In the meantime, the US has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations," Trump tweeted after Lighthizer briefed him on the latest round of talks.

Trump ordered the tariff hike on 6 May after accusing China of walking back commitments Washington believes it had received previously.

Trump said yesterday that he had received a "very beautiful letter" from Xi requesting the two leaders work together. But he also said that paperwork had been started to impose new 25pc tariffs on the remaining $325bn/yr of imports from China that are not yet subject to tariffs. Trump in a series of tweets this morning again said the US stands to benefit from tariffs and vowed to compensate farmers affected by retaliatory tariffs by China.

Trump's somewhat upbeat description of the negotiations — despite the tariff hike — may be an effort to ease concerns among the business community about the future relationship between the world's two largest economies. The IMF estimates that 25pc tariffs on all bilateral trade could reduce GDP growth rates in the US by 0.6 percentage points and in China by 1.5 percentage points.

The latest US import tariffs cover many metals, ores, chemicals and fertilizer products, although some technologically sensitive materials such as rare earths were excluded from a revised list published in September when the 10pc rate took effect.

The higher 25pc tariff rate will apply to products exported from China to the US on or after 10 May, according to US customs guidance. Products covered by the tariff that were exported before today, and which arrive in the US by 1 June, will be subject to the previous 10pc rate.

China's retaliatory tariffs cover around $60bn/yr of US imports including LNG, some chemicals, metals and undenatured ethanol, among other products at rates of 5-10pc. LNG imports from the US are subject to a 10pc tariff.

These are the third round of bilateral tariffs imposed since the US-China trade dispute heated up last year. The measures have already stalled trade in many commodities, with China's imports of LNG from the US falling by almost 80pc from a year earlier to only around 200,000t during January-March this year. Despite crude not being subject to sanctions, China's imports of US crude in the first quarter this year were limited to just 22,000 b/d in February after averaging 377,000 b/d during January-July 2018 before the trade war heated up.