BEIJING/WASHINGTON — The United States and China slapped tit-for-tat duties on US$34 billion worth of the other’s imports on Friday, with Beijing accusing Washington of triggering the “largest-scale trade war” ever in a sharp escalation of their months-long conflict.
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 US$500 billion worth of Chinese goods, or roughly the total amount of U.S. imports from China last year.
China’s commerce ministry, in a statement shortly after the U.S. deadline passed at 0401 GMT on Friday, said that it was forced to retaliate, meaning US$34 billion worth of imported U.S. goods including autos and agricultural products also faced 25 percent tariffs.
However, an ensuing three-plus hour delay before Beijing confirmed that it had implemented retaliatory tariffs sowed confusion in markets.
“After the United States unfairly raised tariffs against China, China immediately put into effect raised tariffs on some U.S. goods,” foreign ministry spokesman Lu Kang told a daily media briefing on Friday afternoon.
China’s soymeal futures fell more than 2 per cent on Friday afternoon before recovering most of those losses, amid market uncertainty over whether China had implemented tariffs on a list of U.S. goods, including soybeans.
Some Chinese ports had delayed clearing goods from the United States, four sources said on Friday. 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.
Ford Motor Co said on Thursday that for now, it will not hike prices of imported Ford and higher-margin luxury Lincoln models in China.
An analysis of over four dozen imported U.S products facing higher duties showed that prices were little changed on Friday afternoon versus earlier in the week. The products, all sold on Chinese e-commerce platforms, ranged from pet food to mixed nuts and whiskey.
While Chinese state media have slammed Trump’s protectionism and on Friday likened his administration to a “gang of hoodlums,” the trade conflict has gained little traction on China’s tightly controlled social media, not cracking the 50 top-searched topics on the Twitter-like Weibo platform.
The dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent weeks.
Chinese shares, which have been 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 also managed to end up.
In the run-up to Friday’s tariff implementation, there was no sign of renewed negotiations between U.S. and Chinese officials, business sources in Washington and Beijing said.
“We can probably say that the trade war has officially started,” said Chen Feixiang, professor of applied economics at Shanghai Jiaotong University’s Antai Colege of Economics and Management.
“If this ends at US$34 billion, it will have a marginal effect on both economies, but if it escalates to US$500 billion like Trump said then it’s going to have a big impact for both countries,” Chen said.
‘Gang of Hoodlums’
China’s commerce ministry called the U.S. actions “a violation of world trade rules” and said that it had “initiated the largest-scale trade war in economic history.”
Trump has railed against Beijing for intellectual property theft and barriers to entry for U.S. businesses and a US$375 billion U.S. trade deficit with China.
“You have another 16 (billion dollars) in two weeks, and then, as you know, we have US$200 billion in abeyance and then after the US$200 billion, we have US$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 on Friday.
“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.”
While the initial volley of tariffs was not expected to have major immediate economic impact, the fear is that a prolonged battle would disrupt makers and importers of affected goods in a blow to global trade, investment and growth.
“For companies with supply exposure to tariffs, they will move sourcing country of origin if they can; if they can’t, they’ll pass on as much of the tariff cost as they can, or see a cut in margins,” said Jacob Parker, vice president of China operations at the U.S.-China Business Council in Beijing.
A China central bank adviser said the planned U.S. import tariffs on US$50 billion worth of Chinese goods – US$34 billion plus a planned follow-on list worth US$16 billion – will cut China’s economic growth by 0.2 percentage points, although the overall impact would be limited, the official Xinhua news agency reported Friday.
“This is not economic Armageddon. We will not have to hunt our food with pointy sticks. But it is applying the brakes to a global economy that has less durable momentum than appears to be the case,” Rob Carnell, chief economist at ING, said in a note.
U.S. Customs and Border Protection officials were due to collect 25 per cent duties on a range of products including motor vehicles, computer disk drives, parts of pumps, valves and printers and many other industrial components.
China’s tariffs on hundreds of U.S. goods include top exports such as soybeans, sorghum and cotton, threatening U.S. farmers in states that backed Trump in the 2016 U.S. election, such as Texas and Iowa.
© Thomson Reuters 2018