World Economy

US and China Dig In for Largest Trade War in History

Chinese Commerce Ministry spokesman Gao Feng says the proposed US tariffs would hit international supply chains.
Chinese Commerce Ministry spokesman Gao Feng says the proposed US tariffs would hit international supply chains.

The administration of US President Donald Trump on Friday imposed 25% import tariffs on $34 billion worth of Chinese goods such as industrial robots, in what he described as retaliation for Chinese intellectual property abuses.

In response, China's Ministry of Commerce said on its website that it "is forced to take necessary countermeasures" to safeguard the country's interests, Nikkei reported.

"The US has started the largest trade war in history," the ministry said, stating its intention to bring the matter to the World Trade Organization while stressing the government's commitment to making business easier for foreign companies.

China also implemented retaliatory tariffs on some imports from the US Friday, state media reported, immediately after the new US duties had taken effect.

China was being forced to respond after the US had "launched the largest trade war in economic history," the ministry said.

The move signals the start of a full-blown trade war between the world’s two largest economies, after Trump administration had initially made good on threats to impose steep tariffs on Chinese goods.

The US trade representative has sent out a note declaring that any goods entering the country or withdrawn from warehouses at or after 12:01 a.m., Eastern Daylight Time, will be subject to the tariffs.

Opening Fire on the World

The levies will apply to 818 types of products arriving in the US, including automobiles, semiconductors and industrial machinery.

The United States is "opening fire" on the world with its threatened tariffs, the Chinese government warned on Thursday, as the two locked horns in a bitter trade war.

Trump has threatened to escalate the trade conflict with tariffs on as much as a total of $450 billion in Chinese goods if Beijing retaliates, with the row roiling financial markets including stocks, currencies and global trade of commodities from soy beans to coal.

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

"If the US implements tariffs, they will actually be adding tariffs on companies from all countries, including Chinese and US companies," Gao said.

China Says Will Not Falter

"US measures are essentially attacking global supply and value chains. To put it simply, the US is opening fire on the entire world, including itself," he said.

"China will not bow down in the face of threats and blackmail and will not falter from its determination to defend free trade and the multilateral system."

Asked whether US companies will be targeted with "qualitative measures" in China in a trade war, Gao said the government will protect the legal rights of all foreign companies in the country.

"We will continue to assess the potential impact of the US-initiated trade war on companies and will help companies mitigate possible shocks."

Gao said China's foreign trade is expected to continue on a stable path in the second half, though investors fear a full-blown Sino-US trade dispute will deal a body blow to Chinese exports and its economy.

Threat to Both Sides

He emphasized that US tariffs on Chinese exports will hurt both Chinese and foreign firms.

Foreign companies accounted for $20 billion, or 59%, of the $34 billion of exports from China that will be subject to new tariffs from the US starting from Friday, with US firms accounting for a significant part of that 59%, Gao added.

European officials have told Reuters that China has put pressure on the European Union to issue a strong joint statement against Trump's trade policies, but so far they have insisted on not taking sides.

Most Asian stock markets were down in early trading on Friday but pared the losses after the tariffs kicked in.

China's benchmark Shanghai Composite Index fell as much as 1.6% in the morning but swung to a 0.8% gain after the lunch break. Similarly, Hong Kong's Hang Seng index was trading lower for the fourth straight day but was up by as much as 0.7% after the tariffs took effect.

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