US, China slap tit-for-tat duties on $34b worth of goods

Beijing calls it largest-scale trade war as Trump threatens tariffs on $500b of goods

BEIJING/ WASHINGTON: The United States and China slapped tit-for-tat duties on $34 billion worth of each other’s imports on Friday, with Beijing accusing Washington of triggering the largest-scale trade war as the world’s two biggest economies sharply escalated their conflict.

Hours before Washington’s deadline for the tariffs to take effect, US President Donald Trump upped the ante, warning that the United States may ultimately target over $500 billion worth of Chinese goods or roughly the total amount of US imports from China last year.

China’s commerce ministry, in a statement shortly after the US deadline passed on Friday, said it was forced to retaliate, meaning imported US goods including cars, soybeans and lobsters also faced 25% tariffs.



China’s soymeal futures fell more than 2% on Friday afternoon before recovering most of those losses amid initial market confusion over whether Beijing had actually implemented the tariffs, which it later confirmed it had.

“We can probably say that the trade war has officially started,” said Chen Feixiang, Professor of Applied Economics at Shanghai Jiaotong University’s Antai College of Economics and Management. “If this ends at $34 billion, it will have a marginal effect on both economies, but if it escalates to $500 billion like Trump said then it’s going to have a big impact on both countries.”

Friday’s long-expected tariff volley fuelled fear that a prolonged and escalating battle would deal a blow to global trade, investment and growth while also hurting US farmers who stand to lose revenues and potentially driving up food prices in China.

“Trade war is never a solution,” Chinese premier Li Keqiang said at a news briefing with Bulgarian Prime Minister Boyko Borissov in Sofia before a summit with 16 central and eastern European countries.



“China would never start a trade war but if any party resorts to increase in tariffs then China will take measures in response to protect development interests.”

Earlier, there was no sign of renewed negotiations between US and Chinese officials, business sources in Washington and Beijing said. “Our baseline forecast assumes only a modest further escalation in the trade war this summer,” Bank of America-Merrill Lynch said in its note. “However, we can’t rule out a full-blown, recession-inducing trade war,” it said.

The dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent weeks. Chinese shares, battered in the run-up to the tariff deadline, reversed earlier losses to close higher, but the yuan remained weaker against the dollar.

Asian equities wobbled but managed to end up. China had lodged a case with the World Trade Organisation (WTO) against the US, its commerce ministry said in a one-line statement.

Price watch

Importers of American retail goods hit by higher Chinese duties were reluctant to pass the costs on to consumers for now.

An analysis of over four dozen targeted US products showed that prices were little changed on Friday afternoon from earlier in the week. The products, all sold on Chinese e-commerce platforms, ranged from pet food to mixed nuts.

Ford Motor Co said on Thursday that for now, it would not hike prices of imported Ford and higher-margin luxury Lincoln models in China. Some Chinese ports had delayed clearing goods from the US, four sources said.

There did not appear to be any direct instructions to hold up cargoes, but some customs departments were waiting for official guidance on imposing added tariffs, the sources said.

Gang of hoodlums

Trump has railed against Beijing for intellectual property theft and barriers to entry for US businesses and a $375-billion US trade deficit with China.

“You have another 16 [billion dollars] 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? So we have 50 plus 200 plus almost 300,” Trump told reporters aboard Air Force One on Thursday.

Throughout the escalating conflict, China has sought to take the high road, positioning itself as a champion of free trade, but state media ramped up criticism of Trump on Friday.

“In effect, the Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China,” the state-run China daily newspaper said in an English language editorial.

“Its unruliness looks set to have a profoundly damaging impact on the global economic landscape in the coming decades, unless countries stand together to oppose it.”

A China central bank adviser said the planned US import tariffs on $50 billion worth of Chinese goods - $34 billion plus a planned follow-on list worth $16 billion - will cut China’s economic growth by 0.2 percentage point, the official Xinhua news agency reported.