China warns Trump on tariffs, threatens retaliation on supply chain deals

China warned the Donald Trump administration on Tuesday against reigniting trade tensions by restoring tariffs on its goods next month, and threatened to retaliate against nations that strike deals with the United States to cut China out of supply chains.

Washington and Beijing agreed to a trade framework in June that restored a fragile truce, but with many details still unclear, traders and investors on both sides of the Pacific are watching to see if it will unravel or lead to a lasting detente.

On Monday, U.S. President Donald Trump began notifying trade partners of sharply higher U.S. tariffs from Aug. 1, after he delayed all but 10 percent of his April duties on most countries to give them time to strike deals with the world's largest economy.

China, initially singled out with tariffs exceeding 100 percent, has until Aug. 12 to reach an agreement with the White House to keep Trump from reinstating additional import curbs imposed during tit-for-tat tariff exchanges in April and May.

"One conclusion is abundantly clear: Dialogue and cooperation are the only correct path," the official People's Daily said in a commentary, referring to the exchanges in the current round of China-U.S. trade tension.

The article was signed "The Voice of China,” a term the paper uses to express views on foreign policy.

Reiterating Beijing's view that Trump's tariffs amount to "bullying," the paper added, "Practice has proven that only by firmly upholding principled positions can one truly safeguard one's legitimate rights and interests."

The remarks set the stage for another round of tariff wars should Trump stick to what the ruling Communist Party's official daily said was "a so-called final deadline."

The average U.S. tariff on Chinese exports now stands at 51.1 percent, while the average Chinese duty on U.S. goods is 32.6 percent, with both sides covering all their trade, the Peterson Institute for International Economics said.

The paper also took a swipe at regional economies that are considering striking tariff reduction deals with the United States that cut China out of their supply chains.

Last week, Vietnam secured a tariff reduction to 20 percent from 46 percent with a deal for goods "transshipped" through it, typically originating from China, to be subjected to a levy of 40 percent.

"China firmly opposes any side striking a deal that sacrifices Chinese interests in exchange for tariff concessions," the paper said.

"If such a situation arises, China will not accept it and will respond resolutely to protect its legitimate interests."

Reuters