China Threatens U.S. Cars, Planes and Soy in Response to Trump

China swiftly retaliated against the Trump administration’s latest proposed penalties on Chinese goods, announcing 25% tariffs on critical American exports, including soybeans, airplanes and autos.

China’s cabinet, the State Council, said Wednesday that the tariffs will cover 106 categories of products and affect $50 billion of Chinese imports of U.S. products. The tariff rate and the sum of goods targeted match the proposal unveiled by the Trump administration Tuesday to punish Beijing for what it says are unfair practices to acquire American technology.

Neither the U.S. nor Chinese tariffs take effect immediately. The Chinese government didn’t specify when its penalties would be imposed. A Finance Ministry statement said that authorities are watching how the U.S. implements its proposed trade actions.

“Frankly speaking, we’re facing huge challenges today,” Vice Finance Minister Zhu Guangyao told reporters at an official briefing following the release of the plan.

The Chinese plan makes good on warnings that Beijing would respond to U.S. trade actions with proportional measures. In a key difference, Beijing has targeted the biggest American exports to China: soybeans and airplanes. Many of the other goods on the list—including sorghum and beef—intentionally affect the U.S. Farm Belt, where voters supported President Donald Trump, according to people familiar with the plans for retaliation.

By contrast, the Trump administration plan levies 25 % tariffs on a broader range of goods—1,300 categories in all—such as dishwashers, medical equipment and machine tools.

Some economists see a risk in going after high-profile U.S. products, leaving Beijing few further options in a trade fight. “Beijing is facing a difficult time now as it has resorted to its core weapons, such as soybeans and cars. If the disputes escalate, what else can Beijing use?” said Jianguang Shen, an economist at Mizuho Securities.

Weeks and perhaps months could pass before either side moves to impose the tariffs, providing an opportunity for negotiations. Under the U.S. plan, companies have until May 22 to object to the proposed tariffs and the government has at least 180 days after that to decide whether to move ahead.

The tit-for-tat measures raises prospects for a full-blown trade fight, and the news that China was preparing to retaliate jolted already jittery markets. The yen jumped 0.4% against the dollar to JAY 106.15 in afternoon trading, while the price of gold, a haven bet, rose 0.8% to USD 1,347.60.

Hong Kong’s Hang Seng Index dropped 2.2 % to a near eight-week low, while May crude oil futures tumbled 1.2 % to USD 62.78 a barrel on the New York Mercantile Exchange.

In explaining China’s response to the U.S. actions, Chinese officials criticized President Trump’s overall approach to trade frictions between the world’s two largest economies.

“Those who attempt to make China surrender through pressure or intimidation have never succeeded before, and will not succeed now,” Foreign Ministry spokesman Geng Shuang told reporters.

Vice Commerce Minister Wang Shouwen said at a separate briefing that the Trump administration demand to reduce the trade imbalance between the countries by $100 billion is “absolutely unacceptable.”

China’s trade surplus in goods with the U.S. hit a record high in 2017— $275.8 billion according to Chinese customs data, and $375 billion according to U.S. figures.

Trade tensions have been rising this year in response to a series of Trump administration moves to place penalties on Chinese-made solar panels, dishwashers, steel and aluminum. Tuesday’s move was the largest proposed action and comes after an investigation into alleged efforts by Beijing to compel American companies to transfer technology.