China rejects 'blackmail' on eve of U.S. tariff hike

Stocks at Risk Caterpillar

China rejected "threats and blackmail" ahead of planned US tariff hike, striking a defiant stance Thursday in a dispute companies worry could flare into a full-blown trade war and chill the global economy.

On July 6, tariffs on Dollars 34 billion worth of imports will take effect, and Beijing has promised to retaliate in kind.

On Thursday, Commerce Ministry spokesman Gao Feng hit back at "threats and blackmail" ahead of the planned US tariff hike.

Washington's targets for higher border taxes focus on industrial components like PC parts, fuel pumps, construction equipment and autos, according to trade data firm Panjiva.

China cannot match Trump on tariffs - it imported $130 billion in goods from the United States past year, compared with America's $505 billion in purchases from China - but it can apply other forms of pressure, analysts say.

"US measures are essentially attacking global supply and value chains".

A strong rise across autos boosted European shares on Thursday, as hopes over a softening in US trade rhetoric lifted the sector, though trading remained cautious ahead of a USA deadline to impose tariffs on Chinese goods.

"As long as the United States issues a so-called tariff list, China will take necessary measures to firmly protect its legitimate interests", he added, without elaborating.

"China will not bow down in the face of threats and blackmail and will not falter from its determination to defend free trade and the multilateral system", the spokesperson added.

And a USA manufacturer that exports vehicles to China recorded a 98 percent jump in random border inspections over the past month, throwing the firm behind schedule.

"The markets lack strong direction without incentives from the United States, where their markets were closed yesterday".

Chinese stocks have taken a beating in recent weeks, entering a bear market, as concerns about the trade-war have mingled with worries about how an ongoing debt-control campaign will feed through into the outlook for economic growth.

AUTO STOCKS RALLY: German newspaper Handelsblatt reported that a US official has met with German carmakers to discuss impending American tariffs on auto imports from the European Union.

"By threatening unilateral action without having any allies and not reducing domestic discord on trade, the Trump administration has invited China to stand tough", said Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies.

On Friday, U.S. tariffs on $34 billion worth of Chinese imports will take effect.

"Washington can not contain China's growth through a trade war", read the headline of an editorial Thursday in the Global Times, a party newspaper.

In fighting back, China could impose onerous regulatory and bureaucratic hurdles on USA companies' Chinese operations.

There was no mention of the trade tensions in reports on the latest travel advisory posted by the Chinese Embassy in Washington.

This new era of protectionism could hardly have come at a more sensitive time for markets.

Trump himself tweeted this week that the economy is doing "perhaps better than ever" even "prior to fixing some of the worst and most unfair Trade Deals ever made by any country".

A USA industry source said: "There is a 99 percent chance that tariffs go into force on Friday".

China's imports from the United States were just US$130 billion previous year and so Beijing does not have the capacity to hit back in kind, raising speculation it could respond by creating administrative headaches for companies in China.

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