China has indicated it is ready to cut interest rates and ease lending rules to deal with the impact of Donald Trump’s tariffs, as markets across Asia plunged on Monday morning.
The sell-off came after Mr Trump said he would not negotiate an end to his trade war with China until Beijing “solves” its trade surplus with the United States.
China’s response to the tariffs has been the toughest in the world so far, announcing a 34 per cent tariff on all US imports and a raft of other measures targeting specific sectors and companies. Mr Trump’s 34 per cent tariff on all Chinese imports comes into force on Wednesday, on top of a 20 per cent levy he introduced earlier this year.
“We do not provoke trouble, nor are we intimidated by it,” the Chinese government said on Saturday. “Pressuring and threatening are not the right way in dealing with China. China has taken and will continue to take resolute measures to safeguard its sovereignty, security, and development interests.”
A front-page commentary on Monday in the People’s Daily, the official newspaper of the Central Committee of the Chinese Communist Party (CCP) said the leadership in Beijing had long anticipated Mr Trump’s actions. It said that the tariffs imposed by the US would cause a shock to the Chinese economy but “the sky will not fall” and Beijing would respond with domestic measures as well as retaliation.
“Monetary policy tools such as reserve requirement ratio cuts and interest rate cuts have sufficient adjustment room and can be introduced at any time; fiscal policy has already clearly stated the need to increase spending intensity and accelerate the pace of spending, and tools such as fiscal deficits, special-purpose bonds, and special treasury bonds still have room for further expansion as needed,” it said.
“We will use extraordinary measures to boost domestic consumption, accelerate the implementation of established policies, and introduce a batch of reserve policies in a timely manner; we will resolutely stabilise the capital market and stabilise market confidence with practical policy measures, and relevant plans and policies will be introduced one after another; governments at all levels will provide precise assistance to industries and enterprises more severely impacted.”
Beijing has signalled that it is open to negotiations with Washington but that it is prepared for a trade war that will hurt its economy as it struggles with deflationary pressures. Its tough response contrasts with the approach taken by other governments in Asia, most of which have offered to make concessions to Mr Trump in the hope of reducing or delaying the tariffs.
Japan’s prime minister Shigeru Ishiba said he would call Mr Trump to ask for the 24 per cent tariff on Japanese goods to be delayed and go to the US as soon as possible to offer a broader deal. This could see Japan importing more liquefied natural gas (LNG) and agricultural products from the US and spending more on defence.
“When we negotiate with the US, we want to present a package. That will take some time, but we will make it a success,” Mr Ishiba told parliament on Monday.
Cambodia, which faces a 49 per cent tariff on all its goods entering the US, said it will cut tariffs on 19 categories of American imports from 35 per cent to 5 per cent. Vietnam, which faces a 46 per cent tariff, has offered to remove all tariffs from US imports.
Malaysia’s prime minister Ibrahim Anwar has said his country, which is currently chairing the Association of Southeast Asian Nations, will lead efforts to co-ordinate a regional response to the tariffs. Most governments in Southeast Asia have indicated that they are not planning to retaliate against the US tariffs and are hoping to negotiate with Mr Trump.
