Published: Sun, July 08, 2018
Economy | By Melissa Porter

China and Russian Federation hit back at Trump tariffs

China and Russian Federation hit back at Trump tariffs

USA tariffs against Chinese imports took effect early Friday and President Donald Trump made clear Thursday that he is prepared to sharply escalate a trade war between the world's two biggest economies. The milestone marks a new and damaging phase in a conflict that has roiled markets and cast a shadow over the global growth outlook.

"The first round's impact is not that big, but the key is whether there will be more - a second round of revenge and retaliation and a third round, " said Shi Yinhong, a professor of worldwide relations at Renmin University in Beijing.

China's tariffs on hundreds of U.S. goods include top exports such as soybeans and cotton.

But U.S. stocks edged higher on Thursday, lifted by technology shares, amid hopes that American trade tensions with Europe may ease after German Chancellor Angela Merkel said she would back a reduction of European auto tariffs if Washington abandons its threatened higher vehicle levies. Requests for comment went unanswered at the U.S. Treasury, USTR and the U.S. Commerce Department.

The looming tariffs have prompted central bank officials to try to reassure investors.

Trump imposed tariffs of 25 percent on steel imports and 10 percent on imported aluminum from several countries.

"This is a dark day for economists". Trump has declared trade wars as "easy to win" and bet the skirmish will prompt American companies to return operations to the US.

Trump's comments appeared to increase the stakes for potential retaliation by China.

What goods are to be targeted?

And Chinese authorities quickly retaliated with equivalent tariffs on $34 billion worth of imported USA goods - previously promised as ranging from vehicles to soybeans, beef and other agricultural products. $34 billion dollars worth of trade to be exact.

Chinese analysts said the first round would be tough but manageable, but were bracing for more to come.

How will the tariffs be implemented? The US has imposed tariffs worth $34bn on China so far, although it will introduce a second round covering 284 more products at a later date, taking the total to $50bn.

They include road-building equipment, products for the oil and gas industry, and tools used in mining.

"There are no winners in a trade war", said William Zarit, chairman of the American Chamber of Commerce in China.

The Asian giant is already expected to cancel American soybean imports due to the 25% tariff on the legume and, according to Bloomberg, has already purchased 19 cargoes from Brazil. The economic fundamentals mean a sharp depreciation of the yuan is unlikely, he said in an interview with the Financial News.

Ernst says her message to Iowa farmers during the current uncertainty is to hold on while trade deals develop.

The Commerce Ministry didn't immediately provide details as to whether and when its pledge to introduce reciprocal tariffs on USA imports would be introduced, creating an air of optimism in financial markets that the trade war may not escalate quickly.

"To put it simply", Chinese Commerce Ministry spokesperson Gao Feng said at a news conference Thursday, "the opening fire on the entire world, including itself".

What can the real-world impact be?

He explains that he has already seen the effects in the pork industry.

"This continued escalation poses a serious threat to growth and recovery in all countries, and we are beginning to see this reflected in some forward-looking indicators", WTO Director General Roberto Azevedo said in a statement. The JPMorgan-Markit global composite PMI rose to a four-month high of 54.2 in June.

But the risk is that a spiralling conflict undermines economic growth by gumming up global supply chains and inflicting higher prices on companies and consumers.

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