US raises import tariffs on China as talks continue

The US has raised tariff rates on $200bn/yr of imports from China after a first day of trade talks between the two countries ended without a deal.

The tariffs were increased to 25pc from the previous rate of 10pc at 12.01am Eastern Standard Time (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.

Talks between Chinese vice-premier Liu He and US government officials including Trade Representative Robert Lighthizer and Treasury Secretary Stephen Mnuchin started late yesterday in Washington and will continue today. Recent negotiations on a wide-ranging trade deal had appeared to be making progress, but were derailed after US President Donald Trump accused China of attempting to renegotiate the agreement.

Trump said yesterday that he had received a "very beautiful letter" from Chinese President Xi Jinping 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.

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, the US Trade Representative said. 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.