China has struck back at US accusations that it reneged on trade commitments, saying it was Washington that repeatedly tried to change the terms of the negotiations midway through the talks.
In its first detailed explanation of the failure of the discussions, China’s foreign ministry on Tuesday accused Washington of trying to force Beijing to suddenly increase the volume of goods it was willing to buy from the US as part of an agreement, violating terms struck in December.
The US “arbitrarily raised its asking price”, said a spokesman for the foreign ministry. “The hat that . . . violates promises is absolutely not on the Chinese head.”
Washington launched the latest salvo in the dispute on Friday when it increased duties on $200bn of Chinese imports to 25 per cent and later set in motion a plan to do the same with a further $300bn of goods.
China responded by announcing on Monday it would impose tariffs on $60bn of US imports starting on June 1, sending stocks in the US sharply lower on Monday with the Asia-Pacific indices following suit a day later.
Beijing followed up with a barrage of nationalist commentary on official media designed to shore up support at home for a protracted battle with Washington.
A fiery dispatch on state broadcaster CCTV’s evening news programme went viral on Weibo, China’s largest social media platform, on Monday night and a hashtag for the clip had been viewed more than 3bn times.
“After 5,000 years of trials and tribulations, what kind of battle have the Chinese people not been through?” said Kang Hui, a news reader. “The US-started trade war against China is not more than an important unifying juncture in China’s development. There’s nothing to worry about. China must stand firm, be confident and rise through hardships.”
The foreign ministry spokesman in Beijing on Tuesday said the US had reneged on a joint consensus last May but did not offer any specifics.
The latest tit-for-tat escalation sent China’s CSI 300 index of major stocks listed in Shanghai and Shenzhen down as much as 1 per cent before it pared some of those losses to close down 0.6 per cent.
The Hang Seng China Enterprises index of large-cap Chinese companies listed in Hong Kong dropped as much as 2.4 per cent before closing 1.5 per cent lower.
In Tokyo, the Topix index shed 0.4 per cent after touching its lowest level since January in early trading, while Sydney’s S&P/ASX 200 lost almost 1 per cent.
The declines came on the heels of the S&P 500’s 2.4 per cent tumble on Monday that marked the worst day for the US equities benchmark since early January. The tech-focused Nasdaq shed 3.4 per cent, its biggest loss since December 4.
However, in Europe, London’s FTSE 100 and Frankfurt’s Xetra Dax 30 both rose by 0.4 per cent. Futures contracts for the S&P 500 index point to a rebound of 0.5 per cent when Wall Street reopens.
China’s list of new duties, which mostly matches a list of threatened tariffs originally released last year, will mark a dark day for one US industry: natural gas exports.
US president Donald Trump had pushed for China to sign deals to import liquefied natural gas and Chinese president Xi Jinping had raised hopes on a short visit to Alaska in 2017. But LNG imports from the US will now face a 25 per cent tariff.
Shares in exporter Cheniere Energy fell 3.3 per cent in US trading on Monday, compared with an overall market drop of 2.4 per cent.
Analysts said last year that Mr Trump was forced back to the negotiating table with Beijing by the intensity of the rout in US equities at that time.
But Kerry Craig, a global market strategist at JPMorgan Asset Management, said US politicians might now be more willing to look past stock price falls in the short term, with the S&P still up almost 20 per cent from its December low.
Without any clear schedule for meetings between US and Chinese negotiators, “markets are likely to be more volatile, especially in the absence of any substantive information not written in a tweet”, Mr Craig added.
Helen Qiao, China and Asia economist at Bank of America Merrill Lynch, said that while there was hope that the two sides could mend fences when Mr Trump and Mr Xi meet at the G20 meetings in Osaka in late June, the challenges to a trade deal would probably grow if the two could not reach an agreement.
In a no-deal scenario, Ms Qiao said, multiple rounds of tariff increases on either side would more seriously affect inflation in the US and growth in China, where the annual rise in gross domestic product could slow to 5.8 per cent, below Beijing’s target range of 6 per cent to 6.5 per cent.