'Biggest trade war in economic history': US-China tariffs take effect

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Chinese flag

A 25% tariff is now being applied to $US34 billion worth of Chinese goods entering the United States.

Chinese shares led a recovery by Asian market, partly helped by the perception that the tariff measures were already priced in though worries about what lay ahead for global markets boosted appetite for perceived safe-haven assets such as government debt and the Japanese yen.

"Millions of American jobs depend on America's ability to trade with other countries", the chamber said in a recent statement.

A spokesperson for China's Ministry of Commerce said the USA tariffs violate World Trade Organisation rules.

Months of dialogue between the two economic superpowers appeared to have failed, with Trump warning just hours before the tariffs came into effect that Washington was ready to impose duties on hundreds of billions more in Chinese imports.

Trump has vowed for years to tackle Chinese trade practices, accusing Beijing of stealing USA intellectual property and slammed the $375 billion US trade deficit with the country.

The president's tariffs, the PIIE's researchers conclude, are "a prime example of 20th century tools aimed at the knowledge-embodying trade flows of the 21st century".

Forecasters say a full-blown conflict could knock up to 0.5 per cent off global economic growth through 2020 if Washington and Beijing impose tariff hikes on $250 billion of each other's 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".

"President Trump has really left no exit ramps here", Gold told CNBC, adding, "We're in a downward spiral".

For instance, China's 25% retaliatory duty on whiskey could harm the United States producers, according to the Distilled Spirits Council.




Both sides showed signs of digging in further as the tariffs went into effect.

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?"

Economists have warned that the tit-for-tat measures could throttle global growth and strike at the heart of the world trade system, causing shockwaves across the planet.

"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", the newspaper added.

The list avoids direct tariffs on consumer goods such as cellphones and footwear.

China is targeting agriculture products and mechanical parts for the energy sector, whereas the U.S. is aiming its tariffs at a large number of industrial products and resources.

That would bring the total of targeted Chinese goods to potentially US$550 billion - more than the US$506 billion in goods that China actually shipped to the United States a year ago. US stocks edged higher on Thursday, however, amid hopes that American trade tensions with Europe may ease after comments from German Chancellor Angela Merkel.

Carmaker BMW said it could not absorb all of the 25% tariff on the cars it exports to China from a plant in Spartanburg, South Carolina and would have to raise prices.

Mr Trump has railed against Beijing for intellectual property theft and barriers to entry for United States businesses and a $375 billion United States trade deficit with China. "At that point, the United States will be more interested in negotiations, and the Chinese side will also want to come to the table".

"There should be no doubting Beijing's resolve", the China Daily said.

On the streets of Beijing, there were some concerns that prices would rise due to the tariffs but also a determination to support the Beijing authorities in the trade war.

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