BEIJING: Beijing warned it would match the Trump administration step for step should it move ahead with new tariffs on Chinese imports, as trade data showed the country is shoring up its economy for a long trade conflict with the U.S.

China’s Ministry of Commerce on Wednesday criticized the U.S.’s plan to impose new 25% tariffs on $16 billion in Chinese goods on Aug. 23, and released an updated list of items it would target with similar tariffs that would go into effect the same day.

“This is very unreasonable,” the ministry said. “In order to defend China’s rightful interests and the multilateral trade system, China has to retaliate as necessary.”

Its comments came as government data showed imports of resources including coal, crude oil and iron ore surged in July, driven by infrastructure projects such as rail construction that Beijing is encouraging to wall off the economy from the trade fight.

Imports in July were up 27.3% from a year earlier, narrowing China’s monthly trade surplus to $28.1 billion, from $41.6 billion in June. Economists polled by The Wall Street Journal had expected a surplus of $39.1 billion.

The data came a day after the U.S. said it would start to expand tariffs on additional Chinese imports, including electronics and semiconductors, later this month—the latest salvo in the escalating trade battle between the world’s two biggest economies. Relations between the two countries have been tense as the Trump administration tries to address the U.S.’s $376 billion trade deficit with China, and punish China for alleged pilfering and pressure tactics to acquire U.S. technology.

Back in June, Beijing said it plans to retaliate with tariffs of its own on $16 billion worth of U.S. goods. On Wednesday it released an amended list of items that will be affected, which includes various chemicals and medical equipment, as well as certain types of sedans and diesel vehicles.

State media, in an editorial published Wednesday, said that China will get through this storm, and those placing tariffs on it would end up hurting themselves, without resolving economic imbalances.

“Some people selfishly swim against the tide and act against morality, wantonly raising the barrier of tariffs and waving the stick of hegemony everywhere,” said the editorial, originally published by the official Xinhua News Agency.

The Chinese economy faces strengthening headwinds from weakening consumption to slowed production and investment. The yuan has declined by around 6% against the dollar in the past two months—though that is helping some companies caught in the crosshairs of the trade battle.

Li Jingli, a site leader at an American mechanical equipment manufacturer operating in Hebei, said that the falling yuan makes the products it exports to the U.S. cheaper in dollar terms.

Some items that his company exports to the U.S. are included in an earlier U.S. list of $34 billion in Chinese imports subject to tariffs. The company plans to pass onto its customers any added cost not offset by the depreciating yuan, he said.

His company is also considering shifting final assembly work outside China, possibly to India or Mexico. But that can’t happen fast, as the company needs to get certifications for the types of industrial products it produces. “No one likes the trading war. That makes everyone so busy,” he said.

U.S. companies operating in China remain concerned about retaliation beyond tariffs, which could include products getting stuck at Chinese ports or delays or increased scrutiny in licensing approvals. Beijing’s tariff options are limited because it imports far less from the U.S. than the U.S. imports from China.

U.S. chip maker Qualcomm Inc. is among the most prominent victims of the U.S.-China trade row, having scrapped its $44 billion plan to acquire Dutch chip maker NXP Semiconductors because Chinese regulators didn’t approve the deal before a deadline the two companies had set.

State-run tabloid Global Times, in an opinion piece last week, warned that American brands including Apple Inc. are positioned to become Beijing’s bargaining chips in the trade battle.

“The Chinese market is vital for many top U.S. brands, giving Beijing more leeway to play hardball in the trade conflict,” it said. “If Apple wants to continue raking in enormous profits from the Chinese markets amid trade tensions, the company needs to do more to share the economic cake with local Chinese people.”

Apple didn’t immediately respond to a request for comment.

The spat could escalate further. Trump administration trade officials have unveiled a list of Chinese imports totaling $200 billion that they are considering for 25% tariffs. China followed up last week by unveiling its own retaliatory list of $60 billion in U.S. products, should the $200 billion plan take effect. - WSJ

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