China will retaliate over Trump tariff hike, predicts Ludlow

Washington expects Beijing to retaliate over Donald Trump’s latest tariff hike, says chief economic adviser Larry Kudlow. Speaking to Fox News, Ludlow said: “The expected countermeasures have not yet materialised. We may know more today or even this evening or tomorrow.”

As talks came to a close on Friday, Trump ordered that tariffs on Chinese imports worth around $200bn be raised from 10% to 25%. The Guardian said the move “raised the spectre of a full-blown trade war”, and according to CNBC “Beijing has a host of options to retaliate”.

China’s Commerce Ministry has said it would take countermeasures against Trump’s latest tariff hike. It did not announce what its response would entail but said it “deeply regrets” the turn of events.

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There is speculation that China could target US farmers because the industry is important to Trump politically. China could also turn the screw on American firms operating in Asia. “Really anything could be fair game,” said Susan Shirk, former deputy assistant secretary of state during the Clinton administration.

Although Kudlow concedes that “both sides will suffer” from the trade dispute, Trump has downplayed the impact of the tariff hike on the US.

“We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate,” he tweeted.

“We will be taking in tens of billions of dollars in tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-tariffed countries.”

However, experts say a 25% tariff will be much harder for businesses to absorb than 10%, and this means they are more likely to pass on some of the cost to consumers in the form of raised prices.

The effects of the trade tensions continue to be felt globally. The International Monetary Fund said the raising of the stakes was one factor to have contributed to a “significantly weakened global expansion” late last year as it cut its 2019 global growth forecast.

Britain has encouraged both sides to step back from the battle, warning that an all-out trade war would have disastrous consequences for both the UK and global economy.