US at war with China over trade tariffs

U.S. President Donald Trump impose new tariffs on Chinese goods on Friday, a decision that will almost certainly spark a trade war between the world’s two largest economies.

The Trump administration’s 25% tariffs are targeting more than 800 Chinese products worth $34 billion such as industrial machinery, medical devices and auto parts. They kicked in just after midnight ET, which is noon in Beijing.
China’s tariffs on US goods came into effect immediately afterward, a spokesman for the Chinese Foreign Ministry said Friday.

“China is forced to strike back to safeguard core national interests and the interests of its people,” the country’s Commerce Ministry said in a statement. It accused the United States of “typical trade bullying.”

Beijing said it will hit an equal value of US exports, a total of more than 500 items, including SUVs, meat and seafood.

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Even before Friday, the trade dispute between the world’s top two economies had rattled markets and prompted warnings from companies of damage to their bottom lines and higher prices for consumers. American companies doing business in China are particularly worried.

“Increased tensions in the US-China economic relationship will negatively impact operations in China,” William Zarit, chairman of the American Chamber of Commerce in China, said in a statement Friday.

The big question is how far the hostilities between Washington and Beijing will go. The United States is also set to impose 25% tariffs on another $16 billion in Chinese exports later in the summer, and China has vowed to retaliate against US goods worth a similar amount.

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. But Trump has said his administration will respond to retaliation from Beijing with much bigger waves of tariffs, raising the prospect of worsening tit-for-tat reprisals. On Thursday, he suggested the possibility of tariffs on almost $500 billion more of Chinese goods.

He described the potential escalation to reporters aboard Air Force One: “Thirty-four, and then you have another 16 in two weeks and then, as you know, we have 200 billion in abeyance and then after the 200 billion we have 300 billion in abeyance. OK?” Trump said. “So, we have 50 plus 200 plus almost 300.”

That amount is higher than an earlier threat from Trump to target as much as $450 billion of Chinese exports. It’s also bigger than the $505 billion of goods that the United States imported from China last year.

Trump and his advisers argue the tariffs are necessary to pressure China into abandoning unfair practices such as stealing intellectual property and forcing American companies to hand over valuable technology.
Beijing denies it’s in the wrong and says it’s ready to fight a trade war until the end.

“The United States will be open firing on the whole world and also on itself,” Chinese Commerce Ministry spokesman Gao Feng told reporters on Thursday. Underpinning the dispute about technology is Trump’s anger at America’s $375 billion deficit in goods trade with China. But after three rounds of negotiations between the two sides, including a Chinese pledge to significantly increase purchases of American products, Trump decided to go ahead with the tariffs.

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The clash with China comes as the Trump administration is also fighting over trade with American allies such as Canada and the European Union. US tariffs on steel and aluminium imports have provoked retaliatory measures against billions of dollars of American exports. Trump has added to the tension by threatening new tariffs on cars.

For the time being, analysts say it’s hard to see Washington or Beijing backing down in the dispute. The two giant economies appear ready to see which side can endure the most pain. The damage could also spread to other economies, hurting business confidence and prompting companies to delay investments.

Economists thinks the Trump administration’s enthusiasm for the conflict “will erode as the economic pain and political fallout from a trade war begin to take hold. At that point, the US will be more interested in negotiations and the Chinese side will also want to come to the table.”But reaching a deal that’s palatable to both sides will be tough. Analysts say China is unlikely to budge on those plans, which it sees as crucial for developing its huge economy.