United States tariffs take effect, China warns of 'counterattack'

Chinese factory claims it's making Trump's 2020 campaign flags amid trade war talk

Chinese factory claims it's making Trump's 2020 campaign flags amid trade war talk

Adding to concerns this week was a leaked report suggesting Trump had asked his officials to look at pulling the U.S. out of the World Trade Organisation (WTO) altogether. And if China did not back down, he warned that he would up the stakes, first to tariffs on $200 billion worth of Chinese goods, and then to $500 billion, which is pretty much the entire complement of Chinese exports to the US.

China's central banker said Trump's promised tariffs of 25% on $50bn of Chinese goods - Friday's $34bn to be followed by $16bn in a few weeks - would shave 0.2 percentage points off of China's GDP and the "overall impact would be limited", according to Xinhua.

The first round targets Chinese industrial goods, not consumer products, in an attempt to limit the impact on USA households, but companies that rely on Chinese-made machinery or components may eventually have to pass along increased costs to customers.

The riskiest economic gamble of Trump's presidency could spread as it enters a new and unsafe phase by imposing direct costs on companies and consumers globally. "A little fighting may be the only way the Trump administration clears its mind and allows everyone to sober up", the state-run Global Times said.

China is the biggest buyer of US soybeans, importing more than $12.4 billion worth of the oil seed in 2017.

That comes on top of other tariffs imposed on China, Mexico and the European Union. "It seems like he has another campaign going on in 2020", the company owner Li Jiang said.

China's tariffs, on the other hand, will hit agricultural products like soybeans and pork.

Even American businesses that have long complained about China's tactics asserted that tariffs and trade war was the wrong way to go about addressing the issue. But the thing is some say the trade war started this morning, and in a war, it's not always calm or controllable or rational.

Under a full-blown trade war in which the USA slaps 10 per cent tariffs on all other countries and they respond, the economists reckon U.S. growth would slow by 0.8 percentage point by 2020. China is our top market, importing 31 percent of our crop a year ago.

Trump is doubling down on his promise to put "America First" in the nation's foreign and economic policies.

The dollar fell Friday as markets weighed a stronger-than-expected jobs market with an escalating trade battle between the U.S. and China.

Several southern states, many of which also backed Trump in the election, also risk being hit.

The Federal Reserve is picking up signs that the trade war is causing businesses to rethink investment plans. In the White House in 2018, he has started to make good on that pledge. "However, we can't rule out a full-blown, recession-inducing "trade war", it said.

A model by Pictet Asset Management reckons a 10 per cent tariff on United States trade fully passed on to consumers could tip the global economy into stagflation and knock 2.5 per cent off corporate earnings globally. The U.S.is effectively requiring Chinese leaders to abandon or scale back a high-tech push that they consider vital to their country's future.

The extent of the economic damage will depend on how far both sides go. Others say they are turning their focus to Chinese consumers.

USA vehicle manufacture giant General Motors (GM) is also eyeing a loss in the face of the trade wars Washington is waging.

Foreign companies accounted for $20 billion, or 59 percent, of the $34 billion of exports from China that would be subject to new USA tariffs, with US firms accounting for a significant part of that 59 percent, Gao said. But he doesn't "see the war ending until there are casualties".

A DBS analysis shows that South Korea, Malaysia, Taiwan and Singapore are the economies most at risk in Asia based on trade openness and exposure to supply chains. Trump's attempt to use the steel and aluminum tariffs to pry concessions from the Mexicans and Canadians proved futile.

In the short term, analysts said, the moves may disrupt markets and hinder trade in both countries.

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