China on Tuesday announced that its state-owned companies have halted their purchases of agricultural goods from the US in response to Washington’s ramping up of tariffs on Chinese imports, a move that will further escalate the ongoing trade war between the two economic giants.
In a statement posted on its website, China’s Commerce Minister said that the US’ decision to slap an additional 10 per cent of tariffs on $300 billion worth of Chinese products, effective September 1, was a “grave violation” of the agreements reached at the June 29 meeting between Presidents Xi Jinping and Donald Trump on the sidelines of the G20 summit in Osaka, Japan, reports Efe news.
China is one of the largest buyers of American agriculture, making this decision a serious blow to US farmers and traders.
The Ministry added that it would not rule out tariffs on newly-purchased agricultural goods after August 3.
It boasted of China’s large market capacity and the “bright prospects” for the import of high-quality US agricultural products.
However, the Ministry made it clear that these “bright prospects” were subject to Washington implementing the consensus reached at the meeting between the Chinese and the US Presidents as well as putting into practice the commitments to create the necessary conditions for cooperation in the agricultural sector between the two countries.
Tuesday’s announcement comes amid rising tensions in the trade war that both countries have been waging since last year, and which has taken a new turn since Trump announced new tariffs due to a lack of progress in trade negotiations.
In what many analysts believe is a response to the new tariffs by Trump, the Chinese yuan on Monday fell past the psychologically-important level of 7 yuan to the dollar for the first time since April 2008.
A weaker yuan makes it cheaper for US buyers to purchase Chinese goods, helping offset the impact of higher tariffs, but also makes China’s imports costlier.
Following the unexpected fall in the value of the Chinese currency, the US Treasury Department formally labelled China a “currency manipulator” and threatened to take the matter to the International Monetary Fund to “eliminate the unfair competitive advantage created by China’s latest actions”.
“In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past,” the Department said in the statement.
“This pattern of actions is also a violation of China’s G20 commitments to refrain from competitive devaluation.”
Over the past year, China and the US have imposed tariffs on billions of dollars of one another’s goods.
In May, Trump increased from 10 per cent to 25 per cent a tariff on Chinese imports worth $200 billion. China retaliated by slapping tariffs on US imports worth $60 billion.
Trump later threatened to impose tariffs of up to 25 per cent on another $325 billion of Chinese imports, causing concern in financial markets and the business community.