US-China trade war to kick off as Trump slaps tariffs on $34bn worth of goods from world's largest economy

Both nations' duties are due to hit at the same time

Andrew Buncombe
New York
Thursday 05 July 2018 21:10
Donald Trump signs order imposing tariffs on steel and aluminium

Donald Trump is pushing ahead with plans to impose billions of dollars of tariffs on Chinese goods, a move that will set off a trade war between the world’s two largest economies.

After months of bluster and rhetoric, the US appeared set to impose 25 per cent tariffs on $34bn of Chinese goods at 12:01am on Friday. China had initially considered taking the initiative and “retaliating” first, but later decided to impose its own sanctions at the same time.

As the deadline for the measures to take effect became closer, a Chinese government spokesman said Beijing “will not bow in the face of threats and blackmail”.

Commerce Ministry spokesman Gao Feng said the country was waiting to see what Washington did before responding.

“China will not bow in the face of threats and blackmail,” he said, according to the Associated Press, adding that if the tariffs were imposed, China would “fight back to defend the core interests of the country and the interests of the people”.

Mr Trump has long threatened to impose tariffs on Chinese goods, complaining about a $375bn deficit in goods traded with China. In March, when he threatened to impose tariffs on goods from a number of nations, he claimed any resulting trade war could be good.

“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” he tweeted.

Canadian Prime Minister Trudeau say new tariffs announced by the Trump administration are unacceptable

The US tariffs on China that are due to take effect on Friday will target more than 800 different items, including industrial machinery, medical devices and auto parts. Beijing plans to fire back by hitting 545 American products such as SUVs, meat, soybeans and seafood.

The US and China sought to negotiate their way out of such a situation, but after three rounds of talks, including a Chinese pledge to significantly increase purchases of American products, Mr Trump decided to go ahead with the tariffs.

The clash with China comes as the Trump administration is also fighting over trade with American allies such as Canada and the European Union. US tariffs on steel and aluminium imports have provoked retaliatory measures against billions of dollars of American exports. Mr Trump has added to the tension by threatening new tariffs on cars.

The Chinese Communist Party’s newspaper, Global Times, took the US to task for threatening to raise tariffs on billions of dollars’ worth of exports.

In a sharply worded editorial on Thursday, the newspaper suggested Beijing was bracing for a fight. “If the US is determined to escalate conflicts with China, then so be it,” it said. “Perhaps the Trump administration can only clear its mind after a fight.”

The Wall Street Journal said in addition to the tariffs on $34bn worth of goods set to go into effect Friday, the two countries have proposed a second round targeting $16bn worth of products. It remains unclear when those measures would be implemented.

Many economists have said that if the tariffs stop there, the impact on both economies cloud be small, but Mr Trump has said his administration will respond to retaliation from Beijing with tariffs on as much as $400bn of Chinese goods, raising the prospect of a spiralling back-and-forth.

"I don't think that a serious trade war is in the making. The quantity of goods affected is still small (about 1/6 of one percent of US GDP for the tariffs on Chinese imports). Trump has so far been mostly interested in promoting the interests of America's biggest corporations, despite occasional rhetoric to the contrary," Mark Weisbrot, co-founder of the Washington DC-based Centre for Economic and Policy Research, told The Independent.

"They don't want a trade war and neither do the Chinese. Trump doesn't even want anything that will push stock prices down. So, although Trump is unpredictable, if I had to bet, I would bet there won't be any serious economic damage coming from trade wars in the foreseeable future."

Others saw the prospect for trouble.

“By threatening unilateral action without having any allies and not reducing domestic discord on trade, the Trump administration has invited China to stand tough,” Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Centre for Strategic and International Studies, told CNN.

“The Trump administration also believes that at least starting a trade war is in its interests; the US economy is strong enough to endure a crimp in trade, the president’s domestic political standing is as strong as ever amongst Republicans, and pushing China hard on trade may help restore US credibility on other issues.”

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