…As May set to face pressure to ditch Chequers plan in cabinet showdown***
A new round of US tariffs on Chinese goods has kicked in, the largest yet in the escalating trade war between the economic superpowers.
The US started imposing tariffs on $200bn ($152bn) worth of Chinese products from 12:01 Beijing time (04:01 GMT), in response to what it says are unfair trading practices by China.
China has retaliated with tariffs on $60bn of US goods.
It says the US has started the “largest trade war in economic history”.
The latest move takes the total amount of Chinese imports hit by US tariffs since July up to $250bn. This means about half of all Chinese imports to the US are now subject to these new duties.
The latest escalation comes as China cancelled further trade talks with the US,according to media reports.
What happened on Monday?
The latest US duties apply to almost 6,000 items, making them the biggest round of trade tariffs yet from Washington.
They affect handbags, rice and textiles, although some items such as smart watches and high chairs have been exempted.
US companies importing the Chinese products in question will have to pay an additional 10% levy.
The tax will rise to 25% from the start of 2019, unless the two countries agree a deal.
In contrast, China is placing an additional 5% duty on US products including smaller aircraft, computers and textiles, and an extra 10% on goods such as chemicals, meat, wheat and wine.
The tariffs to date
In total, the US has imposed three rounds of tariffs on Chinese products this year, totalling $250bn worth of goods.
It placed 25% tariffs on $50bn worth of imports from China in two separate rounds.
In July, the White House increased charges on $34bn worth of Chinese products.
Then last month, the escalating trade war moved up a gear when the US brought in a 25% tax on a second wave of goods worth $16bn.
Beijing retaliated in kind.
In response to the first two rounds of US tariffs, China imposed duties on $50bn of US products, targeting key parts of the president’s political base, such as farmers.
Why is the US doing this?
President Donald Trump says he wants to stop the “unfair transfers of American technology and intellectual property to China” and protect jobs.
Tariffs, in theory, will make US-made products cheaper than imported ones, thereby encouraging consumers to buy American. The idea is that this will boost local businesses and support the national economy.
But many US companies and industry groups have testified to the US Trade Representative’s Office that their businesses are being harmed.
There are signs that companies are already being affected, and the IMF has warned major escalations will hit global growth.
Mr Trump’s tariff policies are part of his protectionist trade agenda since taking office, which challenges decades of a global free trade system.
In the meantime, Theresa May will come under intense pressure from leading Brexiters on Monday to ditch her Chequers proposals and back a free trade deal with the EU instead as she faces a bruising cabinet showdown in the wake of the disastrous Salzburg summit.
The former Brexit secretary David Davis and leading Eurosceptic Tory MP Jacob Rees-Mogg are among those backing a report by the Institute of Economic Affairs which is expected to set out an alternative plan for a hard Brexit departure from the EU.
The launch, attended by a series of high-profile Brexiters, comes just hours before the prime minister comes face to face with her cabinet for the first time since her humiliation at the hands of EU leaders who rejected key elements of her Chequers plan.
Immigration will be one of the key points of discussion at the hastily arranged meeting a week before Tory conference at which May is expected to argue for strict controls to reassure Brexiters and boost her leadership in the face of open revolt.
Several cabinet ministers have privately expressed dismay at the fate of May’s Chequers proposals and are understood to be advocating a move towards a Canada-style trade deal. At least two are thought to be prepared to raise the issue directly.
One cabinet source said: “Chequers in its present form is a non-starter for the EU so it’s time for us to look at the alternatives. We should at least look again at the prospect of a free trade agreement.”
However, the Brexit secretary, Dominic Raab, was unequivocal on Sunday that such a proposal was “off the table” as it would mean reverting to the EU’s backstop solution for Northern Ireland which would create a hard border down the Irish sea.
“People need to read the small print, not just of our proposals, but the EU’s proposals, because what they’re suggesting is not just a free trade deal but for us to stay locked in, or for Northern Ireland specifically to stay locked into the customs union,” he said.
“Now that would be a clear carve up of the United Kingdom. It’s off the table in the terms that the EU would even plausibly at this stage accept.”
Those in cabinet backing a shift towards a Canada-style deal deny that it would lead to a border in the Irish Sea, although it would be dependent on the EU agreeing to soften its position on border checks if a Brexit deal looked within reach.
No 10 sources said that alternative proposals for the border had already been rejected by Brussels. One said: “There aren’t any easy solutions to any of these problems. We know that the idea of a Canada-style free trade deal cannot and would not happen without the backstop.”
One cabinet minister warned that colleagues should wait to see what counter-proposals to Chequers were put forward by Brussels in early October before looking at other options: “If they wholesale reject Chequers then we will have to do something before we get to no deal, but not until then.”
It comes after the foreign secretary, Jeremy Hunt, appeared to suggest that the government was pivoting away from its existing plans towards a free trade deal, as demanded by the Eurosceptic wing of the Tory party. Hunt and Brexiter Penny Mordaunt will be in New York for the UN general assembly.
There is also likely to be a standoff at the cabinet over the prime minister’s post-Brexit plans for immigration, with May and the home secretary, Sajid Javid, pushing for an end to preferential access for EU citizens and focus on a global migration scheme.
Other cabinet colleagues, led by the chancellor, Philip Hammond, and the business secretary, Greg Clark, are understood to harbour some doubts about the proposals and are likely to argue the benefits of a flexible system for skilled workers.
Sajid Javid is among this group, according to reports in the Times and Sun, which claim the home secretary is planning to propose that EU citizens be given free entry to temporarily stay in the EU for 30 months after Brexit in the event of no deal, in order to protect the economy. The reports say that during this period such citizens would then have to apply for a visa under a new migration system.
Meanwhile, leading Brexiters will publish their alternative plan, written by trade guru Shanker Singham, for a future trading relationship with the EU, setting out the benefits of striking out alone to do deals with the rest of the world. It will also suggest a new regulatory environment and present their solutions for the issue of the Irish border.
At an event in central London, key Tory figures are expected to repeat their call for May to “chuck Chequers” and adopt their proposals instead, arguing that the EU’s rejection of her plans in Salzburg meant that they were dead.
Raab also dismissed suggestions over the weekend that May could call a snap general election in the autumn to save her Brexit plans. “It’s for the birds. It’s not going to happen,” he told the BBC.
He insisted the government would keep negotiating with the EU on the basis of Chequers: “This is a bump in the road. We will hold our nerve, we will keep our cool and we will keep negotiating in good faith. I think we need to keep these negotiations going,.”
But Raab added: “What we are not going to do is be dictated to. The UK is one of the biggest economies in Europe, if not in the world. We have come up with a serious set of proposals … We are not just going to flit from plan to plan like some sort of diplomatic butterfly.”
BBC with additional report from Guardian UK