BEIJING: China on Monday promised retaliation if U.S. President Donald Trump escalates their tariff battle, raising the risk Beijing might target operations of American companies as it runs out of imports for penalties.

The threat came after Trump said Friday he was considering extending penalties to an additional $267 billion of Chinese products in their battle over Beijing’s technology policy. That would be on top of $50bn of goods already hit by 25 per cent duties and another $200bn on which Washington is poised to raise tariffs.

“If the United States insists on imposing another round of tariffs on Chinese products, China will definitely take countermeasures to safeguard its legitimate rights and interests,” foreign ministry spokesman Geng Shuang said.

Geng gave no details, but the government said in June it would impose unspecified “comprehensive measures” if necessary. That left American companies on edge about whether Beijing might use its control over the heavily regulated economy to disrupt their operations by withholding licenses or launching tax, anti-monopoly or other investigations.

China matched Washington’s first round of tariff hikes on $50bn of its goods, but their lopsided trade balance means Beijing is running out of imports for retaliation. The United States imported $3 of Chinese goods last year for every $1 of American goods bought by China.

Chinese leaders agreed in May to narrow that trade gap by purchasing more American soybeans and other products. But they reject Trump’s demand to roll back official industry plans such as “Made in China 2025,” which calls for state-led creation of global champions in robotics, artificial intelligence and other technologies.

Washington, Europe and other trading partners argue those plans violate Beijing’s market-opening pledges. American officials worry they might erode US industrial dominance. But Communist leaders see them as China’s path to prosperity and global influence.

China’s exports to the United States have been unexpectedly resilient, rising by double digits in July and August despite the US tariff hikes. That might add to Washington’s frustration and prompt more import controls.

Exports to the United States in August rose 13.4pc to $44.4bn, ticking up from July’s 13.3pc growth. Chinese imports of US goods rose 11.1pc to $13.3bn. China’s trade surplus with the United States widened to a record $31bn.

Beijing matched Washington’s first round of tariffs on $50bn of goods. But after Trump’s threat to target another $200bn of goods in a second round of increases, China issued a list of only $60bn of American products for possible retaliation.

China’s imports from the United States last year totaled $153.9bn. After the earlier tariffs targeting $50bn of US goods, that leaves barely $100bn for retaliation, or half of Trump’s $200bn list of goods for the second round of tariffs.

Published in Dawn, September 11th, 2018