US tariffs on $34bn (£25.7bn) of Chinese goods have come into effect, signalling the start of an all-out trade battle between the world’s two largest economies.
The 25% levy came into effect at midnight Washington time.
China said the US had started the “largest trade war in economic history” and promised “necessary counterattacks”.
Many fear the move will damage global trade and growth.
What is happening on Friday?
President Donald Trump had ordered the US to impose tariffs on $50bn worth of Chinese goods – and China has said it will retaliate in kind.
The first round of these tariffs kicked in on Friday. Businesses will have to pay 25% additional tax on $34bn of certain Chinese products they import – including aircraft tyres and commercial dishwashers.
China, which also plans to start collecting a 25% levy on $34bn of US goods such as agricultural products and cars, lashed out.
“This kind of taxation is a typical trade bullyingism, which is seriously jeopardising the safety of global industrial chain and value chain, hindering the pace of global economic recovery, triggering global market turmoil,” a Ministry of Commerce spokesperson said.
How did we get here?
The move is part of Mr Trump’s protectionist agenda, which has undermined the free trade policies that have shaped the global exchange of goods in recent decades.
He has said the tariffs are aimed at stopping the “unfair transfers of American technology and intellectual property to China” and protecting jobs.
The White House said it would consult on tariffs on the other $16bn of products. Mr Trump on Thursday suggested these could go into effect later this month.
The president has already imposed tariffs on imported washing machines and solar panels, and started charging levies on the imports of steel and aluminium from the European Union, Mexico and Canada.
What else might the US do?
In addition to the $16bn under consultation, Mr Trump has flagged there could be more tariffs in store.
He threatened a 10% levy on an additional $200bn of Chinese goods if Beijng “refuses to change its practices” saying this number could rise even further.
China said it would respond with measures of a “corresponding number and quality” if the US produced a list of products that could be hit.
Mr Trump upped the stakes on Thursday, saying the amount of goods subject to tariffs could be more than $500bn, according to the media reports.
“You have another 16 [billion dollars] in two weeks, and then, as you know, we have $200bn in abeyance and then after the $200bn, we have $300bn in abeyance. OK? So we have 50 plus 200 plus almost 300,” he said.
What could the fallout be?
Stock markets have been jittery ahead of the announcement and are estimated to have lost market value due to trade tensions. On Friday, China’s main stock market in Shanghai fell in morning trade before recovering to be 0.6% higher.
The US tariffs announced so far would affect the equivalent of 0.6% of global trade and account for 0.1% of global GDP, according to Morgan Stanley in a research note dated from before Trump’s comments on Thursday.
The bank estimates that every $100bn of imports affected by the tariffs represents about 0.5% of global trade and 0.1% of global GDP.
Analysts are also concerned about the impact on others in the supply chain and about an escalation of tensions between the US and China in general.
Washington-based think tank the Peterson Institute for International Economics (PIIE) expects US tariffs on Chinese goods, which it says particularly target computers and electronics, to hurt multinationals more than China as well as other firms in Asia.
“China will feel some pain but not as much as these firms in the supply chain that contribute such a large share of the value added in Chinese exports,” Peterson wrote.
The fight could also affect other parts of China-US relations. Given that the US buys nearly four times as much from China as it sells to them, China may have to seek avenues other than trade to retaliate if the battle escalates.
“China can impose leverage in areas outside the economic sphere. In the most extreme case China could undermine the ability of the Trump administration to conclude a nuclear deal with North Korea,” Peterson added.
BBC
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