US tariffs take effect, China announces retaliation

US China

The United States and China slapped tit-for-tat duties on $34 billion worth of the other's imports on Friday, with Beijing accusing Washington of triggering the "largest-scale trade war" ever in a sharp escalation of their months-long conflict.

China's response to the list includes Soybeans - a massive moneymaker for US farmers - Sorghum and Cotton.

"We absolutely will not fire the first shot, and will not implement tariff measures ahead of the United States doing so", it said, without elaborating.

"There are no winners in a trade war", William Zarit, chairman of the American Chamber of Commerce in China, said in a statement published just moments before the 12:01 a.m. Washington-time deadline.

The state-run China Daily fumed: "In effect, the Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China".

Speaking at a weekly news conference, Commerce Ministry spokesman Gao Feng warned the proposed US tariffs would hit global supply chains, including foreign companies in the world's second-largest economy.

At 12:01 a.m., the USA slapped a 25 percent tax on $34 billion worth of Chinese imports.

The two countries have engaged increasingly in verbal sparring in recent months, but Friday's pair of haymakers has dramatically escalated the trade dispute - and that has investors across the world worries about what comes next.

Chinese stocks actually rose after the announcement, with the benchmark Shanghai Composite Index up almost one per cent and the Shenzhen index climbing more than one per cent.

Li further added that he and workers at his factory are "not so worried" because they have a price advantage over competitors.

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China's imports from the U.S. were just US$130 billion a year ago 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.

Economists say that if the back-and-forth stops there, the overall impact on both economies will be minimal even though some industries will suffer. "A trade war is the last thing we want to see, because we said many times that no one will benefit from a trade war", said Lu.

Trump has threatened to raise tariffs on China to roughly the value of total Chinese exports to the United States a year ago of $506bn. The president said U.S. tariffs on an additional $16 billion in Chinese goods are set to take effect in two weeks. "So we have 50 plus 200 plus nearly 300".

"One of the big scary unknowns is we don't know how China will react", Mr. Austin Ramirez, Husco International's chief executive, told the paper. Trump has railed against Beijing for intellectual property theft and barriers to entry for U.S. businesses and a $375 billion USA trade deficit with China.

"The progress of China's economy can not be reversed by any force".

But then wages rise, making exports more expensive, and the country gets stuck in what's known as the "middle income trap". Exports to the U.S. account for only 19% of all of China's exports.

"We think that you can change China's behavior without shooting yourself in the foot". China is the top export market for United States soybeans, accounting for almost $14bn in sales and representing nearly a third of total United States soybean production in 2017, according to the American Soybean Association.

Some analysts such as Singapore-based DBS say the USA economy could suffer more than China's, as US levies could affect American firms with investments in the country and Washington is also involved in other trade conflicts.

Morgan Stanley estimates that world trade could be seriously disrupted as two-thirds of goods traded are linked to global value chains.

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