Tuesday 18 September 2018 9:41 am

China says it has ‘no choice’ but to retaliate to new wave of US tariffs

China today said it has "no choice" but to retaliate to against America's decision to levy 10 per cent tariffs on $200bn (£150bn) worth of Chinese goods.

The commerce industry said in a statement to Reuters that China would respond to the US action "to protect its legitimate rights and interests and order in international free trade".

"China is left with no choice but to retaliate simultaneously," it added, without specifying how it would respond. It said it hoped the US would "recognise the negative consequences of its actions, and take convincing steps to correct its behaviour in a timely manner".

US president Donald Trump also threatened to hit China with tariffs on another $267bn worth of products if China retaliates.

So far the tariffs will apply to around 6,000 items. They include handbags, rice and textiles.

Hussein Sayed, chief market strategist at FXTM, said markets such expect to see more "aggressive monetary and fiscal action" to dilute the effects of the trade war.

"There’s no doubt that China’s economy will begin feeling the pain given that the US duties now cover almost half of its imports," he said.

"However, it remains unclear to what extent the US economy will be hurt with these tariffs, but definitely corporate and consumer bills will be on the rise in the coming months."

He said the impact on financial markets was "muted" as Trump's announcement may have been priced in.

"While China cannot match the US tariffs dollar for dollar given the huge trade imbalance, it still has other weapons it could use, including boycotting US products, increasing taxes on earnings of US companies in China, refusing to grant approvals for M&A involving US businesses, and reduce its US debt holdings," he added.

"Chinese officials have also threatened to walk away from the negotiating table, as they seem to be betting on Republicans losing the midterm elections in November. Investors should be prepared for more short-term downside risks across equity markets given all these uncertainties."