US ups ante in ongoing trade war with China

The US will begin charging a 10pc tariff on an additional $200bn/yr of imports from China on 24 September, and increase the rate to 25pc starting on 1 January.

The escalation in an ongoing trade war could prompt retaliatory duties on exports of LNG, chemicals and metals from the US. The action represents the third tranche of tariffs enacted by US president Donald Trump's administration since early July.

The list of products that are subject to new duties includes all energy commodities imported from China, as well as non-ferrous metal ores and concentrates, and most raw and intermediate materials in manufacturing. Consumer electronics products and chemical inputs for manufacturing are excluded, according to the US Trade Representative's office.

Collectively, the tariffs announced today or already in place will cover $250bn/yr - or roughly half of the $506bn in imports from China last year. "For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies," Trump said. "China has been unwilling to change its practices."

China's commerce ministry, anticipating the move, said earlier this month that it would retaliate should the US apply additional tariffs. LNG imports from the US were originally scheduled for a retaliatory tax.

"China will have to take necessary counter-measures and resolutely safeguard our legitimate rights and interests," the Chinese foreign ministry said today, ahead of the US announcement.

The trade war has already prompted China to impose duties on imports of US propane, jet fuel and petroleum coke, as well as coal and metals. China had threatened to impose a 25pc tariff on US crude shipments, but has so far left crude off of its list of affected products. That leaves open the possibility that Beijing includes US crude imports in a subsequent round of tariffs.

Trump appears undeterred. Today he threatened to unveil a 4th round of tariffs soon to cover the entirety of imports from China into the US if Beijing reciprocates.

The three rounds of tariffs could add up to a $62.5bn/yr tax on US consumers by raising the costs of the products they purchase. That potential hit and the prospect of further escalation in the trade war has unnerved congressional leaders and US energy companies, as well as the broader business community. "Any time tariffs are imposed I worry that Americans will be forced to pay extra costs - in this case on nearly half of US imports from China," said Kevin Brady (R-Texas), who as chairman of the House of Representatives Ways and Means Committee oversees foreign trade.

"This current trade dynamic works against US energy sector growth and counter to the administration's stated goal of ‘energy dominance,'" American Petroleum Institute vice president Kyle Isakower said.

The administration has responded to those concerns by leaving open the possibility of a negotiated outcome to the trade war.

"They do want to make a deal — that I can tell you. They want to make a deal," Trump said today. He expressed hope that he and China's president Xi Jinping - "for whom I have great respect and affection" - will be able to find a way to end the trade war.

White House chief economic adviser Larry Kudlow, speaking today at the Economic Club in New York, said that Washington hopes to negotiate greater access for US goods into China, lift limitations on US company activities in that country and stop intellectual property theft.

But Trump insisted that he is justified in imposing tariffs as they will help reduce the US trade deficit. "China is now paying us billions of dollars, and we will see how that all works out," Trump said today. "It will be a lot of money coming into the coffers of the US." Kudlow argued that Beijing ought to be making more concessions because its economy will suffer as a result of tariffs — a view Trump shares. "We are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing," he wrote on Twitter last week.

Even more narrowly focused discussions that Treasury Department officials last month held with China's commerce ministry counterparts in Washington were unsuccessful effort to stall the dispute.

"The escalation of trade disputes does not meet the interests of either party," Beijing said today, calling for "dialogue and consultation on the basis of equality, integrity and mutual respect."