BEIJING/WASHINGTON -- The U.S. proposal to impose tariffs on an additional $200 billion of Chinese goods has triggered declines in the yuan and mainland stocks, binding Beijing's hands while it seeks to retaliate against the measures.
"China is shocked by what the United States did," a Commerce Ministry spokesperson said on Wednesday, according to the official Xinhua News Agency.
"To defend the core interests of the nation and the fundamental interests of the people, the Chinese government will, as always, be forced to take necessary countermeasures" to the Trump administration's move, the spokesperson said.
But with the total value of Chinese exports subject to higher tariffs set to surge to $250 billion -- nearly double China's annual imports from the U.S. -- Beijing cannot simply match the Trump administration dollar for dollar.
A Commerce Ministry representative said China is preparing "qualitative and quantitative" measures. These could include limits on Hollywood films, a halt on sales of group tours to the U.S., stepped-up customs inspections or boycotts. Sales of new American cars in China plunged about 20% on the year in June, double the decline in May.
But complicating matters for Beijing, the yuan continued to fall on Wednesday and the Shanghai Composite Index closed 1.76% lower. Shanghai stocks and the yuan have tumbled since mid-June as the trade war compounds concerns about an economic slowdow.
Beijing's response has been restrained so far. When the U.S. published its previous tariff list last month, China issued a statement almost immediately and announced its own tariff plans just five hours later. This time, it took six hours for the Commerce Ministry to put out a statement, and even that was relatively muted in its criticism of Washington, reportedly at the behest of top Communist Party officials.
As the trade war steams ahead, both sides are showing no sign of progress on the crux of their dispute: control of high-tech industries.
The list of 6,031 items released by U.S. Trade Representative Robert Lighthizer extends far beyond the industrial focus of the $34 billion wave of duties that took effect last week. Goods as varied as handbags, cosmetics, furniture and produce are to be slapped with additional 10% tariffs, though high-value consumer electronics such as mobile phones and computers will remain untouched.
The measure could take effect as soon as September after a public comment period. This, combined with last week's tariffs plus duties on another $16 billion worth of goods likely to take effect in two weeks, would cover half of all American imports from China by value.
President Donald Trump is taking a tough line on trade with China as midterm Congressional elections approach, a White House insider said. The president seeks to use the conflict to fire up his base before voters go to the polls in November.
"We're going to win" the trade war with China "because we have all the cards," Trump declared at a July 5 rally.
Some in the U.S. are warning against escalation as well. The tariffs proposed Tuesday could lead to higher prices on a wide range of consumer goods. "We hope the administration changes course" before America returns to "an era of high prices, job loss and negative growth in our economy," the National Retail Federation said in a statement.
Though the U.S. economy is robust, the minutes of Federal Reserve policymakers' meeting noted indications that "plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy." A downturn in the U.S. could spell trouble for the global growth.
Meanwhile, the Trump administration's unilateral response to China's intellectual property practices could complicate an effort to include aggrieved allies such as Japan and the Europe Union in a comprehensive solution.
Orrin Hatch, chairman of the Senate Finance Committee and a heavyweight in Trump's Republican Party, said Tuesday that the latest proposal "appears reckless and is not a targeted approach."