USA tariffs on Chinese imports take effect

USA tariffs on Chinese imports take effect

U.S. tariffs on $34bn (£25.7bn) of Chinese goods have come into effect, signalling the start of a trade war between the world's two largest economies.

Last year, Chinese consumers suddenly turned against South Korean retailer Lotte, which was forced to shut three-quarters of its shops in China after providing Seoul with land to deploy an American anti-missile shield that Beijing opposes. President Xi Jinping has balked at USA demands to stop subsidizing Chinese firms under his plan to make the nation a leader in key technologies by 2025.

Hours before Washington's deadline for the tariffs to take effect, U.S. 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 U.S. imports from China a year ago.

The Foreign Ministry in Beijing said retaliatory measures "took effect immediately", with state news agency Xinhua confirming they involved 25% tariffs on an equal amount of goods.

Lynn Rohrscheib, chairwoman of the Illinois Soybean Growers, who farms near Moweaqua, called Friday for a return to free trade and access to the Chinese market.

While economists say the consequences of a spat between the world's two largest economies can be contained for now, there are fears that Donald Trump's stance on trade could cause serious damage to the global economy.

Companies worry the spiraling dispute could chill global economic growth.

Financial markets seemed to take the latest developments in stride.

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. President Donald Trump on Friday announced that the US could impose additional tariffs on more than $500 billion in Chinese imports, or roughly the total amount of Chinese imports annually into the USA, according to an article from Reuters.

Judging by the retaliatory tariffs targeted at the range of United States agricultural goods so far, China also seemed to be avoiding an escalation in trade tensions, analysts said.

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Chinese officials have rejected the accusations of theft and said no foreign company is obligated to share technology.

"If U.S. -China trade tensions intensify, it would have an adverse effect on not only China but surrounding countries" that have close economic relations with Asia's biggest economy, said Toru Nishihama, chief economist at the Dai-ichi Life Research Institute.

It is unclear whether the Trump administration appreciates how integrated the global economy has become or have properly thought through the consequences for the U.S. if Xi Jinping and the European Union leadership refuse to blink and subsequently cave in to the USA demands that they sell less to the United States and buy more from it.

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.

World stock markets rose and the euro climbed to a three-week peak on Friday as the threat of tariffs by the United States and China on billions of dollars of trade became a reality, though concerns about the conflict escalating capped the appetite for risk.

Retaliatory measures by China also include taxes on imports of a variety of U.S. dairy products.

A model by Pictet Asset Management reckons a 10 per cent tariff on United States trade fully passed on to consumers could tip the global economy into stagflation and knock 2.5 per cent off corporate earnings globally. It opened markets for US farmers but led some American automakers to shift production to low-wage Mexico and to then ship cars back to the United States duty-free.

"There are no winners in a trade war", said the chamber's chairman, William Zarit, in a statement.

"We urge the two governments to come back to the negotiation table", said Zarit.

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