Published: Fri, July 06, 2018
Business | By Eloise Houston

China accuses Trump of launching ‘the biggest trade war in economic history’

China accuses Trump of launching ‘the biggest trade war in economic history’

China's commerce ministry said on Thursday the United States is "opening fire on the entire world", warning that Washington's proposed tariffs on Chinese goods will hit worldwide supply chains, including foreign companies in the world's second-largest economy.

The initiative of US President Donald Trump to impose 25% duties on imports from China, the total value of which is estimated at $34 bln, came into force on Friday. Beijing has said retaliatory tariffs on USA goods ranging from soybeans to pork will go into effect immediately after the US acts.

China said it plans to inform the World Trade Organization about the "situation" and work with other countries to defend the multilateral system of free trade, the ministry said. All but Japan have imposed retaliatory tariffs. Requests for comment went unanswered at the U.S. Treasury, USTR and the U.S. Commerce Department. In Hong Kong, the Hang Seng Index edged 0.47% higher at 28,313.74.

The bank estimates that every $US100b of imports affected by the tariffs represents about 0.5 percent of global trade and 0.1 percent of global GDP.

"This is a dark day for economists". To put it simply, the USA is opening fire on the entire world, including itself, ' Gao said. "China is committed to retaliating proportionally".

What goods are to be targeted?

US 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. That's split into two rounds - $34 billion on Friday and $16 billion later.

China has said it will fight back with "equal scale, equal intensity".

How will the tariffs be implemented?

"The tariffs are aimed at patent-intensive industries that rely on global supply chains, disadvantaging American producers and harming USA allies operating in the region", the PIIE analysis concludes.

After months of speculation as to whether or not it would occur, the trade war between the United States and China is now underway in earnest.

But China also believes that its economy, with a greater focus on domestic demand and a reduced dependence on exports, can ride out the storm. The economic fundamentals mean a sharp depreciation of the yuan is unlikely, he said in an interview with the Financial News.

The port of Shanghai had put on hold clearing some US imports through customs, said an official at a company in the coastal city, which handles customs clearance for importers.

President Donald Trump complains that the U.S. trade deficit with China is too large; that the Chinese government gives unfair support to its home-grown companies; that China steals intellectual property from the USA by various means.

The company wants customers to split the cost of the tariff hike, but few are willing, said Tong.

What can the real-world impact be?

He explains that he has already seen the effects in the pork industry. As an example, Chinese companies are reselling US soybeans, and Chinese companies are expected to cancel most of the remaining soybeans they have committed to buy from the the year ending August 31, once the extra tariffs take effect.

Some American business are bracing for impact.

Last year, a statement issued from Trump's re-election team said only 100 per cent American-made products would be issued.

Still, data released Thursday show world growth isn't showing any signs of being dented.

"Although uncertainties have clearly increased this year and pose downside risks to growth, the latest batch of timely activity indicators suggests that in the shorter term the global economy is resilient to these worries", Ben May, director of global macro research at Oxford Economics in London, said in a report on Thursday.

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