China's Latest Threat in Trade War: "Don't Say We Didn't Warn You"

China’s biggest newspaper gave the U.S. fair warning on Wednesday that the trade war could be a protracted one. This time around, China said it would cut off rare earth minerals as part of its latest countermeasure in the tariff-for-tariff scuffle between the two largest economies.

“We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!” the People’s Daily said in a commentary titled “United States, don’t underestimate China’s ability to strike back.”

Earlier this month, China announced it would raise tariffs on roughly $60 billion worth of U.S. goods beginning midnight (Beijing time) June 1, according to China’s State Council Customs Tariff Commission. This came after the U.S. hiked tariffs from 10% to 25% on $200 billion worth of Chinese exports after trade talks held in Washington failed to produce a breakthrough.

China’s latest round of tariffs included the following:

  • Category 1 (includes cotton, machinery, grains) went from 10% to 25%
  • Category 2 (includes aircraft parts, optical instruments, certain types of furniture) went from 10% to 20%
  • Category 3 (includes corn flour, wine) went from 5% to 10%
  • Category 4 (includes certain types of chemical, rare earths, medical equipment like ultrasound and MRI machines) stayed the same at 5%

After a strong first quarter to begin 2019, the second quarter was marred by trade wars as a U.S.-China trade deal that was priced into the markets went from one with the potential to bear fruit to now one that tastes like bitter fruit–one that China is not willing to swallow.

“At no time will China forfeit the country’s respect, and no one should expect China to swallow bitter fruit that harms its core interests,” the People’s Daily said.

White House economic advisor Larry Kudlow told the “Fox News Sunday” program that China must agree to “very strong” trade deal provisions. Until then, Kudlow said U.S. tariffs would remain. Despite the latest tough talk, China, however, was staunch in its unflinching stance.

“The perception that China cannot bear it is a fantasy and misjudgment,” the commentary said. “If they weren’t being seriously provoked, the Chinese people would not favor any trade war. However, once the country is strategically coerced, nothing is unbearable for China in order to safeguard its sovereignty and dignity as well as the long-term development rights of the Chinese people.”

The latest comments came after China promised to take “necessary countermeasures” if the Trump administration follows through on its threat to increase tariffs on Chinese goods. China’s Commerce Ministry said that it will make retaliatory moves if U.S. tariffs on $200 billion of Chinese goods are increased to 25% from 10% as promised by the Trump administration.

“The escalation of trade friction is not in the interests of the people of the two countries and the people of the world,” the ministry said. “The Chinese side deeply regrets that if the US tariff measures are implemented, China will have to take necessary countermeasures.”

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