China ready to retaliate if United States imposes tariffs

U.S. President Donald Trump speaks to the press aboard Air Force One

U.S. President Donald Trump speaks to the press aboard Air Force One

The increase came on the back of a 0.9% increase in imports to a record $261.2 billion, as USA domestic demand remains strong.

The widening trade deficit is expected to drag on third-quarter growth in the United States, after a narrower gap helped boost the pace of expansion in the prior period to the fastest since 2014. China has announced a $60 billion list of American products targeted for retaliation.

Soybean exports, one of China's main trade war targets, fell in July. Levies would be imposed on more than 5,000 goods imported from the United States, including aircraft, soya bean oil, smoked beef, coffee and flour. The gap with the European Union shot up 50 per cent to a record US$17.6 billion and with Canada almost 58 per cent to US$3.1 billion.

China and the United States have already slapped tit-for-tat tariffs on $50 billion of each other's goods, spooking financial markets in recent months as investors and policymakers anxious the bitter trade war could derail global growth.

While other indicators suggest gross domestic product is on track for solid gains in the second half, some economists think that the latest figures show how Donald Trump's tariffs may start to weigh on the economy.

Craig Erlam, a senior market analyst at the foreign exchange platform Oanda, said new US tariffs would be a major escalation by Trump in the US-China dispute.

"Today is the deadline for USA firms to respond to the President's proposal to raise tariffs on a further Dollars 200bn in Chinese exports, and as White House spokeswoman Sarah Sanders stated yesterday, it is "certainly a possibility" that Trump will push ahead with these tariffs after the consultation period ends".

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The difference between total USA imports and exports of goods and services jumped more than US$4 billion, an increase of 9.5 per cent, to US$50.1 billion - just a few hundred million shy of the consensus forecast among economists.

Imposing a 25 percent tariff on a total of $250 billion in Chinese imports - including both tariffs that have already gone into effect this summer and those now under consideration - would result in $62.5 billion in tariff costs for US businesses and consumers each year, the letter said.

In August, China outlined plans for its retaliatory measures, with dutieson $60bn of goods.

China exported $129bn of goods to the USA previous year, while importing about $500bn, so Beijing can not match Trump's $200bn threat in full.

It was the second consecutive month that saw the deficit widen, following the surge of exports in May amid a flurry of buying to outrun tariffs imposed in USA markets overseas.

So far this year, the trade deficit is up 7 per cent from January-July 2017. On Aug 31, USA cash soybean prices fell to the lowest since the last recession ended. That helped GDP grow at a 4.2 per cent annualized pace, the best in nearly four years, which Mr Trump credited to his policies.

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