China retaliates against US tariffs: Update 2

Adds comments from President Trump

China will raise tariffs on imports of US LNG to 25pc from 10pc on 1 June, in retaliation for US president Donald Trump's escalation of the trade war between the two countries.

Beijing's response to Trump's latest trade salvo means that imports of nearly every US energy commodity – except crude – will face taxes of up to 25pc in China. Crude exports from the US to China have fallen since the start of the trade war between the world's largest economies last summer, even though China has not imposed duties on US crude. Less than 100,000 b/d of US crude went to China in January-March, around a quarter of the figure a year earlier, US data show.

The US has increased tariff rates on $200bn/yr of imports from China to 25pc effective 10 May but exempted products shipped before that date and arriving before 1 June. The Chinese countermeasures match 1 June as the effective date. The latest round of Chinese retaliatory tariffs will affect $60bn/yr of imports from the US, at rates ranging from 5pc to 25pc.

China's 10pc tariff on US LNG, implemented in September, already has led to a sharp drop in US LNG flows to China in recent months. The tariff increase to 25pc is unlikely to have a substantial and immediate effect on LNG shipments, given already low US LNG exports to China and a well-supplied global LNG market where Chinese importers can source LNG from other producers.

The Chinese government has invited US trade representative Robert Lighthizer and treasury secretary Steven Mnuchin to visit Beijing to continue negotiations, White House chief economic adviser Larry Kudlow said in a televised interview yesterday.

But Trump said today trade talks are not likely to resume in earnest until he meets with China's president Xi Jinping on the sidelines of the G20 summit of major economies in Osaka, Japan, on 28-29 June. "We will be meeting at the G20 in Japan, as you know. And that will be, I think, probably a very fruitful meeting," Trump told reporters at the White House.

Trump's decision to raise tariffs will lead to "escalation of China-US economic and trade frictions, contrary to the consensus between China and the US on resolving trade differences through consultations, jeopardizing the interests of both sides and not meeting the general expectations of the international community," China's commerce ministry said today.

Existing US tariffs affect $250bn of the $539bn/yr the US imports from China, including many chemical and industrial products. China's retaliation affects $110bn of the $120bn/yr of imports from the US.

"I love the position we are in," Trump said. "There can be some retaliation, but it cannot be very substantial by comparison." The administration will fully compensate US farmers affected by China's retaliatory tariffs, Trump said. "So our farmers can do well — they will be able to sell for less until such time when it is finally sorted out."

He also insisted that US consumers will be insulated from the effects of tariffs — a statement that Kudlow contradicted yesterday, saying that "both sides will pay."

The latest round of US tariffs and Chinese countermeasures is not going to be the last. The US today will commence the administrative process for imposing tariffs on the entirety of imports of goods from China, US trade representative's office (USTR) said. The process could be completed in two to three months, Kudlow said.

But Trump said "I have not made that decision yet."

The tariff hike process involves public consultations, inviting comments from the potentially affected companies. The overwhelming majority of comments from US companies in the previous three rounds of tariffs last year pushed back against the proposal, which did not prevent USTR from moving ahead with tariffs.