China braces for Friday opening of US trade war

The United States and China are set to fire the first shots in a trade war that experts fear will weaken the two giants' economies and slow global growth.

US punitive tariffs will be slapped on Chinese imports worth $34 billion, President Donald Trump confirmed on Thursday just hours before the measures take effect. China has prepared retaliatory duties of 25 percent on the same amount of US products.

"You have another 16 in two weeks, and then as you know we have 200 billion in abeyance and then after the 200 billion we have 300 billion in abeyance," Trump said on board of Air Force One en route to Montana on Thursday.

He was referring to a previous threat that if China retaliates, Washington will raise duties on an additional $200 billion worth of Chinese goods, which translates to roughly half of China's exports to the US.

Speaking at a weekly news conference, Commerce Ministry spokesman Gao Feng warned the proposed US tariffs would hit international supply chains, including foreign companies in the world's second-largest economy.

"If the US implements tariffs, they will actually be adding tariffs on companies from all countries, including Chinese and US companies," Gao said.

"US measures are essentially attacking global supply and value chains. To put it simply, the US is opening fire on the entire world, including itself. China will not bow down in the face of threats and blackmail and will not falter from its determination to defend free trade and the multilateral system."

Asked whether US companies would be targeted with "qualitative measures" in China in a trade war, Gao said the government would protect the legal rights of all foreign companies in the country.

Further escalation risks roiling markets, disrupting global supply chains, and dragging down economic growth, observers say.

An all-out trade war could shave off 0.25 percent of the GDP of both economies this year, with more damage expected in 2019, according to research by Singapore's DBS Bank.

While the US tariffs will apply to Chinese goods such as semiconductor chips and machinery parts, Chinese duties on a wide range of US agricultural products are expected to upset Trump's voter base.

"In this trade war, the one who can persevere until the end is the winner," said economic analyst Ye Tan.

The imposition of tariffs on Friday will be the culmination of work begun in March, when Trump signed a Presidential Memorandum stating that China uses foreign ownership restrictions to require technology transfer from US companies to Chinese organisations, as well as conducting espionage to acquire intellectual property and confidential business information.

The memorandum also said China "directs and facilitates" investment and acquisitions of US companies for technology transfer purposes according to Beijing's plans, and lowers the ability of US companies to license technology to Chinese firms at proper market rates.

"We have a trade deficit, depending on the way you calculate, of $504 billion, now some people would say it is really $375 billion," Trump said at the time. "Many different ways of looking at it, but any way you look at it, it is the largest deficit of any country in the history of our world -- it's out of control.

"We are doing things for this country that should have been done for many, many years -- we've had this abuse by many other countries and groups of countries that were put together in order to take advantage of the United States, and we don't want that to happen, we're not going to let that happen.

"Frankly, it's going to make us a much stronger, much richer nation."

In April, the Trump administration outlined around 1,300 products worth $50 billion that would be hit with proposed tariffs. That list was reduced to 1,102 items of the same value, with 818 items worth $34 billion set to be hit with tariffs from Friday, and the $16 billion remainder to undergo further review and a public hearing on July 24 before a final determination is made.

Earlier this week, the US administration ordered the Federal Communications Commission to deny China Mobile entry to the United States telecommunications industry, citing "substantial and unacceptable risk to US law enforcement and foreign intelligence collection".

The decision came seven years after China Mobile made an application to operate in the United States.

After significant engagement with China Mobile, concerns about increased risks to US law enforcement and national security interests were unable to be resolved," Assistant Secretary for Communications and Information at the US Department of Commerce David J Redl said.

If permitted, China Mobile would have gained access to phone lines, fibre-optic cables, mobile networks, and communications satellites, which the administration said were all "created with minimal security features because it was assumed that only trusted parties would have access".

"The Executive Branch's recommendation to deny China Mobile's application is consistent with a broader law enforcement and national security effort to counter malicious Chinese cyber activity against the United States," a petition by the Executive Branch said.

"The government must be able to trust that the information it provides to the carriers will be kept in confidence and used by the carrier solely for the purpose of protecting its network ... in part because China Mobile is majority-owned by the Chinese government, which the Executive Branch assigns responsibility for a significant amount of unlawful activity, including many cyber intrusions against the United States.

"China Mobile cannot serve as a trusted voice communication provider for these purposes."

Over the course of the past few months, an export ban slapped on ZTE threatened the existence of the Chinese telco equipment giant, with Trump later reversing the decision as a personal favour to Chinese President Xi Jinping.

With AAP

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