Simon Birmingham: China trade tariffs will slow global economy

Chinese markets fall after Donald Trump threatens increase on China goods.

Donald Trump has accused Xi Jinping of reneging on trade promises. Picture: AFP.

China’s Shanghai Composite has opened 1.8 per cent lower this morning, after Donald Trump unveiled a new string of tariffs on $300bn of Chinese goods overnight.

The Shenzhen Composite, which tracks stocks on China’s second exchange, is lower by 2.4 per cent.

Meanwhile, the Hang Seng has dropped by over 2.3pc at the Hong Kong open.

ASX200 is extending its losses, last down 0.58 per cent to 6749.6.

It follows a drop in the ASX, as Federal Trade Minister Simon Birmingham warned Mr Trump’s threatened increase in tariffs on China goods is likely to slow down the global economy.

Speaking on the ABC’s AM from Beijing, where he is attending trade talks, Senator Birmingham said Trump’s threats to add 10 per cent tariffs to $US300 billion worth of Chinese exports was a “disappointing potential escalation in the trade dispute.”

“We know that global economic growth is already slower, thanks to a slowdown in global trading levels.

“This would potentially further slow down global trade levels and potentially have a further damaging impact on global economic growth,” he said.

The Australian share market opened lower by 0.4 per cent to 6763.2 after the President’s announcement sparked falls on Wall Street, while the All Ordinaries was lower by 0.41 per cent to 6843.8.

Asian markets were pummelled, Japan’s Nikkei dropped 2 per cent at the open, while South Korea’s KOSPI fell by 1.3 per cent.

President Trump announced the new tariffs in a series of tweets overnight after the end of another round of trade talks between US and Chinese officials in Shanghai this week.

The US has already imposed tariffs of up to 26 per cent on some $US250 billion worth of Chinese exports to the US.

President Trump said that the tariffs on another $US300 billion would be imposed on September 1 after the trade talks this week failed to produce any significant results.

He accused China of reneging on promises to increase its imports of US agricultural goods and to stop the sale of the drug Fentanyl to the US.

Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing. More recently, China agreed to...

— Donald J. Trump (@realDonaldTrump) August 1, 2019

...buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and...

— Donald J. Trump (@realDonaldTrump) August 1, 2019

...during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%...

— Donald J. Trump (@realDonaldTrump) August 1, 2019

The new tariffs on goods including electronic goods and clothing, would mean that almost all Chinese exports to the US would be subject to extra tariffs as a result of the trade dispute which began early last year.

Senator Birmingham said President Trump’s announcement “reinforced the critical importance” of the trade talks currently in Beijing for a new Regional Comprehensive Economic Partnership (RCEP) between Australia, China, Japan, South Korea, India, New Zealand and the 10 ASEAN nations.

The 16 nations are currently trying to finalise negotiations for a deal by the end of the year.

Senator Birmingham said the RCEP trade talks were “a real counterbalance to increased protectionism elsewhere.”

He said the new tariffs could bring short term benefits for some countries but would damage the global economy.

“It could shift purchasing decisions elsewhere around the globe,” he said, adding: “(But) overall, this type of action has proven to hurt the global economy.”

Senator Birmingham said he hoped that there could be further talks between China and the US which could head off the implementation of the proposed new tariffs.

He said Australia’s trade relationship with China was “incredibly strong” with record levels of two way trade of more than $200 billion in the past year.

“This is a testament to the business and co operation that we see at many diverse levels between Australia and China,” he said.

He said Australia wanted to build on existing trade ties with the region with the negotiation of the new regional trade deal, RCEP.

Senator Birmingham said he may be able to have some private discussions with China’s Commerce Minister, Zhong Shan, about some Australia-China trade issues including the slowdown in the processing of coal from Australia at Chinese ports.

The slowdown has been in place since February with Chinese officials saying it is because of stricter environmental testing on Australian coal imports but most observers believing that it is a quiet signal to Australia that China is unhappy at several aspects of the relationship including Australia’s very public decision last August to ban Chinese telecommunications giant Huawei from supplying equipment for the next generation 5G network.

The so called extra environmental testing on Australian coal is despite the fact that Australian coal is cleaner than Chinese coal and coal imported into China from other countries including Indonesia and Mongolia.

“We want to get some answers around what additional processing and environmental protection measures or checks (on Australian coal imports) are occurring so we can be confident that our businesses can plan around that,” Senator Birmingham said.

“We have seen many shipments processed but we do see some occasional continued delays,” he said.

Senator Birmingham said Australia would be “stressing the need for non discrimination in the application of any checks” in its talks with Chinese officials.

He said China had privately assured Australia that there was no discrimination in its handling of coal from Australia.

“We want to make sure producers and their customers here in China can understand what is happening and have certainty so they can operate as efficiently and as effectively as possible,” he said.