China trade war breaks out as tariffs kick in
- Phyllis King
United States tariffs on $34bn in Chinese imports took effect as a deadline passed on Friday, and with Beijing having vowed to respond immediately in kind, the world's two biggest economies took a high-stakes turn towards all-out trade conflict. It has aimed its tariffs directly at the American heartland, hoping to weaken support for the Trump administration in the months before the midterm election. The US and China slapped levies + on $34 billion of each other's exports, the first tangible shots in a trade battle that both sides are bracing to fight for months.
China retaliated with tariffs on a similar amount of goods.
"After the United States introduced the new tariffs, China's reciprocal measures also immediately took effect", said the spokesman for the Chinese Foreign Ministry Lu Kang.
Ballpark estimates from economists show that every $100 billion of imports affected by tariffs chip away around 0.5 per cent of global trade, wiping off 0.1 percentage points of GDP growth.
Dairy has also become an issue in Mexico, the largest market for US dairy, and farm groups have warned that a 25% tariff on cheese will curb American exports.
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In a further move to escalate tensions between the world's two largest economies, U.S. President Donald Trump said Washington could ultimately raise tariffs on more than $500 billion in Chinese products - almost the total value of U.S. imports from the country past year.
Beijing slapped additional 25 percent tariffs on 545 US imports totaling $34 billion - including automobiles and agricultural products such as soy beans and beef - as part of a retaliatory plan involving 659 items worth $50 billion. It accused the US of igniting "the biggest trade war in economic history". These tactics include cyber-theft and requiring American companies to hand over technology in exchange for access to China's market.
The actions appear to be having the intended effect, if at the cost of pushing up inflation (prices for washing machine in the USA have spiked 16% in recent months, for example). U.S. tariffs on steel and aluminum imports have provoked retaliatory measures against billions of dollars of American exports. "After the U.S. activated its tariff measures against China, China's measures against the United States took effect immediately", Lu Kang said, though he did not elaborate on the details of the measures.
While the U.S. tariffs aim to cut down the trade deficit, there are worries about how China's retaliatory tariffs will hit the USA economy. He said if the flagging prices and tariffs continue for much longer, he could shift more heavily to corn.
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Hun Quach, vice president of global trade for Retail Industry Leaders Association, said US retailers will also deal with the fallout from tariffs.
Canada hit back by imposing tariffs on more than 100 U.S. products, from ketchup to toilet paper, insecticide and washing machines.
China is the biggest buyer of USA soybeans, importing more than $12.4 billion worth of the oil seed in 2017. "In addition, the second-order effects, such as a potential decline in the stock market and corresponding fall in household net worth/consumer confidence, are another threat that could compound the direct effect on growth from a full-blown trade war". China time, 0.16% weaker than the previous day's closing price. If the trade war heats up, officials might impose further obstacles and target a broader range of goods.
During an official visit to Bulgaria, China's No. 2 leader, Premier Li Keqiang, said "no one will win by fighting a trade war, yet China will take countermeasures in the face of unilateral moves". The U.S. Chamber of Commerce this week released state-by-state data of the damage coming from tariffs, and 17 of the 20 worst hit states voted for Mr. Trump in 2016.
Until now, only $3bn of tariffs have taken effect, but President Trump has threatened new tariffs on many occasions.
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