China’s foreign minister said Saturday that his country’s threat to impose retaliatory tariffs on $60 billion of American goods in an escalating trade spat was “fully justified”.
Beijing threatened Friday to bring in the levies on products ranging from beef to condoms, after US President Donald Trump’s administration upped the ante in its plans for additional tariffs on Chinese goods worth $200 billion.
Washington suggested the rate on the proposed extra tariffs could be increased from 10 to 25 percent.
The two countries have been embroiled for months in a trade conflict that has threatened to hurt consumers in both countries.
Washington claims that China’s export economy benefits from unfair policies and subsidies, as well as theft of American technological know-how.
Speaking on the sidelines of a security forum in Singapore, Foreign Minister Wang Yi said China’s threat of retaliatory tariffs was “fully justified and necessary”.
“These are measures taken out of the consideration for upholding the interests of the Chinese people,” he said, speaking through a translator.
He said the move was also aimed at upholding the “global free trade regime” that was underpinned by the World Trade Organization.
Wang also hit back at comments by top White House economic advisor Larry Kudlow, who ridiculed China’s tariff threat as “weak” and said the world’s second-largest economy was in significant “trouble”.
“As to whether China’s economy is doing well or not, I think it is all too clear to the whole international community,” Wang said, adding that China contributed a huge amount to global economic growth.
“I don’t see why he would come to the conclusion that China’s economy is not doing well.”
In early July, the US imposed 25 percent tariffs on $34 billion of Chinese goods, with another $16 billion to be targeted in coming weeks, sparking retaliatory measures from China.
Days later, Washington unveiled a list of another $200 billion in Chinese goods, from areas as varied as electrical machinery, leather goods and seafood, that would be hit with 10 percent import duties.
But Trump raised the stakes this week with his threat to lift the tariff rate.
China has said new duties will be applied only if Washington pulls the trigger on its new tariffs.
The Republican president has been keen to show he is tough on trade ahead of tricky congressional elections in November — but there are growing signs of concern in the White House that the dispute could affect Trump’s political base.
The dominant US services sector continued to grow in July, but at a slower pace as worsening trade tensions continued to drive prices higher, according to an industry survey Friday.
And the largest segment of the economy continued to complain about difficulty finding workers to fill open positions, with the US unemployment rate now down to 3.9 percent.
The Institute for Supply Management said its monthly survey showed its non-manufacturing index fell more than three points to 55.7 percent, due to a sharp decline in production and as orders, including for exports, dropped off.
The result, an 11-month low, was well below the average pace of the past 12 months, and fell far short of the consensus forecast — but still shows expansion.
Any score above 50 percent indicates growth, and the sector has been growing for 102 consecutive months.
“There has been a ‘cooling off’ in growth for the non-manufacturing sector. Tariffs and deliveries are an ongoing concern,” said Anthony Nieves, chair of ISM’s survey committee for the non-manufacturing sector.
However, “The majority of respondents remain positive about business conditions and the economy,” Nieves said in a statement.
The latest data was released shortly after China threatened to impose retaliatory tariffs on another $60 billion in US goods, and possibly take other actions in response to President Donald Trump’s trade policies.
Trump this week announced he would increase duties to 25 percent rather than the planned 10 percent on the next $200 billion in Chinese products to be targeted.
In the services sector, only two of the 18 industries surveyed reported a contraction last month, but the prices index jumped another three points.
While the healthcare sector and other services remained upbeat, others continue to point to increasing trade concerns as a source of concern.
“Business is up overall but a lot of questions loom over the rest of the year. These include concerns about international markets and the increasing tariffs that impact the landed costs of goods,” a survey respondent in the retail trade said.
“Expanding concerns with price increases due to tariff and global trade policy changes and uncertainty,” another in professional services said.
The US trade deficit swelled in June by the largest amount in 19 months, reversing much of May’s trade-war driven export bonanza, even as brinkmanship between Beijing and Washington worsened.
A dip in auto exports and rising oil prices in June drove the increase in the gap between US imports and exports, the Commerce Department reported Friday.
And bilateral US deficits widened with China, the European Union, Canada and Mexico, all trading partners that have retaliated against President Donald Trump’s multi-front global trade war.
Shortly before the numbers were released, Beijing warned it was ready to impose new tariffs on $60 billion in American products, responding to Trump’s plans to jack up the punitive duties on the next $200 billion in Chinese goods to be targeted.
The White House quickly fired back, calling Beijing’s latest counter-threat “weak.” Top economic aide Larry Kudlow warned China it “better not underestimate” Trump’s resolve in the conflict.
The US trade deficit rose 7.3 percent or $3.2 billion in June to $46.3 billion, overshooting analyst expectations in the largest jump since November 2016, according to the Commerce Department.
The result could weigh on revised calculations of second quarter growth in the United States, which Trump hailed as a key achievement last week after it was reported as the strongest GDP increase in nearly four years.
In May, a rush by Chinese importers to beat Beijing’s looming counter-tariffs led to a surge in US exports of crude oil and soybeans, temporarily driving down the deficit and boosting GDP growth in the April-June period.
While soybean exports continued to rise in June, US shipments of automobiles, aircraft and pharmaceuticals fell.
Ian Shepherdson of Pantheon Macroeconomics warned that “a big decline is coming” in the third quarter, which should boost the trade gap by about $3 billion a month.
– Exports and the strong dollar –
“Exports will rise over the quarter, but strong domestic demand growth will lift imports more rapidly,” he said in a client note.
Trump has said trade wars are “easy to win” and made the soaring US-China goods deficit — which rose to $32.5 billion last month — a principal issue in his nationalist economic agenda.
But industry and allies in his Republican Party have expressed fear the dispute could spiral out of control.
Average prices for imported oil hit the highest level since December 2014 at $73.60 a barrel — bringing the value of oil imports for the month to $19.6 billion, also the highest in three and a half years.
Rising oil prices also boosted the value of American crude exports, which were the highest on record at $20.4 billion.
As the Federal Reserve gradually tightens interest rates, the US dollar also has risen steadily since April, making American exports more expensive to foreign buyers.
Oxford Economics said the escalating trade battle between Washington and Beijing made the future even more difficult to predict.
“Our modeling indicates a trade war with China would have clear, negative implications for the US economy,” the forecasting firm said in a research note.
Concluding a two-day visit to Washington on Friday, Jesus Seade, a trade negotiator for Mexican President-elect Andres Manuel Lopez Obrador, said signaled there was a chance to resolve talks to update the North American Free Trade Agreement this month.
“It is feasible that is feasible” to finalize the negotiations in August, he told reporters, but cautioned that there were “complicated things” left to resolve.
Mexica officials will return to Washington next week to continue the discussions.
Wall Street had a good day despite the disappointing trade numbers and concerns about the confrontation with China, which came along with a robust but weaker-than-expected monthly jobs report.
All three major stock indices finished the week slightly higher.