US hits China with $US60 billion in tariffs, reigniting fear of global trade war
AUSTRALIA’S exemption from US President Donald Trump’s tariffs on steel and aluminium imports may only be temporary — with new guidelines released.
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AUSTRALIA’S exemption from US President Donald Trump’s tariffs on steel and aluminium imports may only be temporary.
White House Press Secretary Sarah Huckabee Sanders has revealed exemptions for several countries, including Australia, only last until May 1 this year.
In a statement today, her office said Trump would decide on May 1 whether to continue exemptions for Australia, Europe, South Korea, Canada, Mexico, Argentina and Brazil from the 25 per cent steel and 10 per cent aluminium tariffs long-term.
His decision will be contingent on discussions with the countries over the next month on “satisfactory long-term alternative means to address the threatened impairment to US national security,” the White House has announced.
Australia’s Trade Minister Steve Ciobo has told News Corp the agreement between President Trump and Prime Minister Malcolm Turnbull for an exemption was “unconditional”.
“As the United States has acknowledged, the US could not have a fairer trade relationship than it does with Australia,” Mr Ciobo said.
Earlier, US Trade Representative Robert Lighthizer and Mr Trump’s policy adviser Peter Navarro revealed new details on the exemptions as the US President took the first steps today to slap tariffs of up to $US60 billion on imports from China.
In an interview with CNN, Mr Navarro revealed more about how it would play out.
“Here’s what’s going to happen. They’re temporary exemptions conditioned on the ability of these countries to come to the table and give us more fair and reciprocal trade,” he told CNN.
He said Australia and other countries will get steel and aluminium quotas. This is to stop non-exempted nations trying to find a way around it.
“This is an important thing,” he said.
“Every country that is not facing tariffs that we are going to negotiate with will face quotas so that we protect our aluminium and steel industries. For all countries there has to be a quota. “If you don’t put a quota on then any country that can do whatever they want will become a trans-shipment point for any other country.”
TURNBULL REACTS TO TARIFFS
Mr Turnbull has played down the chances of a global trade war.
China has already hit back today, threatening to increase tariffs on US pork, aluminium pipe and other goods in response to President Donald Trump’s announcement of a new suite of tariffs, along with higher import duties on steel and aluminium.
Prime Minister Turnbull said today he did not expect there to be much impact on Australia from the US move — which amounts to A$78 billion in tariffs — while downplaying the chances of a trade war.
He highlighted that President Trump had opened negotiations on the tariffs with China by giving the nation a 60 day consultation period on the target list of 1300 products that could be affected.
“His contention is that trade should be fair and reciprocal, we understand that, that is the reason why Australians has been exempted from the steel tariff,” Mr Turnbull told reporters in Sydney.
“The important thing is no-one wins a trade war, there is no doubt about that, and we look forward to the US and China being able to negotiate a satisfactory arrangement that suits both sides.”
He did not speculate about what would happen if China retaliated.
China’s Commerce Ministry today criticised President Trump’s action as a violation of global trading principles, while warning it may impose tariffs on a range products imported from the US, including pork, fruit and nuts, wine, stainless steel pipes, recycled aluminium and modified ethanol, among others.
Tariffs would range from 15 to 25 per cent.
AUSSIE MARKET DIPS
Meanwhile, Australian stocks have dropped amid global trade war fears following Trump’s announcement.
The benchmark S & P/ASX200 index was down 1.78 per cent to 5,831.3 points at noon AEDT, with all sectors in negative territory led by the miners.
Resource stocks on the local share market were already under pressure from lower energy and base metal prices and the reaction to the tariff plan on Chinese imports.
Metals miner South32’s shares were down 5.0 per cent to $3.21, BHP Billiton dropped 3.8 per cent to $28.565 and Rio Tinto fell 4.5 per cent to $73.32. At midday, the Dalian iron ore price in China was about six per cent lower. Among the energy companies, losses ranged from Woodside Petroleum’s 1.1 per cent fall to Origin Energy’s 2.3 per cent decline.
The four big banks were each around to two per cent lower, while investment bank Macquarie Group was down 2.5 per cent to $104.06.
Former Australian Prime Minister Kevin Rudd made the dire prediction Trump’s move would spark a trade war this morning after the US President signed a memorandum instructing Mr Lighthizer to assemble the new package of Chinese tariffs.
“And so the trade war begins. Easy to start. Hard to stop. Fasten your seat belts folks,” Mr Rudd wrote on Twitter shortly after the announcement.
The former Labor prime minister is now the president of New York-based think tank the Asia Society Policy Institute.
US MARKET REACTION
US stocks plunged after the Trump administration slapped sanctions on goods and investment from China.
The Dow Jones industrial average dropped more than 700 points as investors feared that trade tensions between the world’s largest economies would escalate.
The planned sanctions include tariffs on $US48 billion worth of Chinese imports as well as restrictions on Chinese investments.
Trump said he’s taking those steps in response to theft of American technology, and the Chinese government said it will defend itself.
Investors are worried that trade tensions would hurt US companies and harm the world economy.
On Thursday they fled stocks and bought bonds, which sent bond prices higher and yields lower.
With interest rates falling, banks took some of the worst losses. Technology and industrial companies, basic materials makers and health care companies also fell sharply.
Peter Donisanu, an investment strategy analyst for the Wells Fargo Investment Institute, said the risk of a damaging trade war is still low because the Trump administration is targeting specific goods that aren’t central to China’s economy.
That could change if it puts tariffs on products like electronics or appliances imported from China.
“If the Trump administration really wanted to hurt China and start a trade war, then they would go after those larger sectors,” he said.
‘THEY’VE GOTTEN AWAY WITH THIS FOR SO LONG’
Mr Trump, in announcing the new tariffs on China overnight, said foreign leaders were laughing at the US over the trade advantages they enjoyed over America.
“I really believe they cannot believe they’ve gotten away with this for so long,” the president said.
“I’ll talk to Prime Minister [Shinzo] Abe of Japan and others, great guy, friend of mine, and there will be a little smile on their face and the smile is: ‘I can’t believe we’ve been able to take advantage of the United States for so long.’ So those days are over.”
But he began his remarks about China with a conciliatory tone, saying: “I view them as a friend.”
The US has given China space to respond to the tariffs.
There will be a 60 day consultation period on target list of 1300 products that could potentially attract the tariffs.
As a candidate, I pledged that if elected I would use every lawful tool to combat unfair trade, protect American workers, and defend our national security. Today, we took another critical step to fulfill that commitment. https://t.co/7NBI0Dibmx pic.twitter.com/nmzqos3BUA
— Donald J. Trump (@realDonaldTrump) March 22, 2018
President Trump’s tariffs have been hailed within the US.
“The president of the United States is standing up for American corporations. He has their back,” National Trade Council Director Peter Navarro told reporters during a briefing.
Even some Democrats — who rarely agree with the president on anything — praised the move.
“I don’t agree with President Trump on a whole lot, but today I want to give him a big pat on the back. He is doing the right thing when it comes to China,” Senate Minority Leader Chuck Schumer said.
The new tariffs regime will also look at intellectual property theft.
Mr Trump and other US officials have long charged China with intellectual property theft — forcing companies to share technology and innovations in order to do business in the country — and the president’s move seeks to combat that.
“Intellectual property is the lifeblood of emerging industries and the good paying jobs they provide. The American advantage of intellectual property is one of the main things that will keep us number one economically in this century. But not if we allow it to be stolen and taken advantage of. And the country that does that more than any other is China,” Senator Schumer said.
“China’s ruthless in how they go after us. They do it quietly, they do it with a smile, and unfortunately, previous presidents, Democrat and Republican, just stood by, as China did what it did to us.”
China has vowed to strike back.
“China will certainly take all necessary measures to resolutely defend its legitimate rights and interests,” the Ministry of Commerce said in a statement.
The US has the world’s largest economy, valued at $US19.4 trillion, while China is second at $US11.9 trillion, followed by Japan, Germany, France, the UK and India.
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