WASHINGTON: US President Donald Trump threatened on Tuesday to impose 10 per cent additional tariffs on $200 billion worth of Chinese goods and pledged to continue tightening the screws as long as a $376bn trade deficit with Beijing is not corrected.

Later on Tuesday, China vowed to retaliate to this “extreme pressure and blackmailing” with both “qualitative and quantitative” measures.

“I directed the United States Trade Representative to identify $200bn worth of Chinese goods for additional tariffs at a rate of 10pc,” said President Trump in a statement issued by his office.

The threat had an immediate impact on the market as in New York, the Dow Jones industrial average lost more than 300 points, or about 1.3pc, in early trading on Tuesday. The carnage in China was far worse where 1,000 stocks were down by 10pc.

As analysts appearing on various US TV channels noted, so far, the US seems to have the upper hand in this trade war, Trump said he has already directed his legal team to start implementing the additional tariffs.

“After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced,” he said.

On Friday, President Trump announced plans for tariffs on $50bn worth of imports from China to “encourage China to change the unfair practices,” particularly in the fields of technology and innovation.

China retaliated by announcing that it too was raising tariffs on $50bn worth of US exports, particularly from the agricultural sector where it could hurt Washington the most.

On Tuesday, China’s Commerce Ministry declared that the United States had “initiated a trade war and violated market regulations,” which was “harming the interests of not just the people of China and the US, but of the world.”

“Such a practice of extreme pressure and blackmailing deviates from the consensus reached by both sides on multiple occasions,” the ministry said in a statement.

Analysts in Washington warned that China could also raise tariffs on US good, as it did on Friday, by announcing additional tariffs of 25pc on $50bn worth of American products.

It could also target high-tech goods, such as aircraft and their spare parts, which is one of the few sectors where the US exports more than it imports.

But the analysts pointed out that last year China imported $129.89bn of US goods, compared with US imports of $505.47bn. They noted that the value of the goods involved in additional tariffs exceeds by $70bn the total value of US imports to China last year.

They argued that this makes it difficult for China to continue to retaliate to Trump’s actions. They noted that China could only levy duties on a total of $100bn-plus of US products. The Trump administration, on the other hand, could impose tariffs on up to $400bn of Chinese goods.

Apparently, aware of the advantage he has in this trade war, Trump said his first measure – of imposing tariffs on $50bn worth of goods – was an initial step toward bringing balance to trade relationship with China.

Rather than changing its “unfair practices” in the acquisition of American intellectual property and technology, China imposed retaliatory tariffs on American goods, he noted, reminding China that he will not stop if Beijing continued to retaliate.

“If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200bn of goods,” President Trump declared. “The trade relationship between the United States and China must be much more equitable.”

Trump said that the actions China announced on Friday “clearly indicate its determination to keep the United States at a permanent and unfair disadvantage,” which, according to him, “reflected in our massive $376bn trade imbalance in goods.”

“This is unacceptable. Further action must be taken to encourage China to change its unfair practices, open its market to United States goods, and accept a more balanced trade relationship with the United States,” the US president declared.

Published in Dawn, June 20th, 2018