China trade battle kicks off; markets take it in stride

China EU USA trade war alliance Donald Trump President Xi

China EU USA trade war alliance Donald Trump President Xi

"The Trump administration also believes that at least starting a trade war is in its interests; the U.S. economy is strong enough to endure a crimp in trade, the president's domestic political standing is as strong as ever amongst Republicans, and pushing China hard on trade may help restore United States credibility on other issues", he added. Previously, Trump had threatened up to impose additional tariffs on goods worth $400 billion should China follow through on its plans to retaliate against the initial US tariffs on Chinese goods including autos, computer disk drives, pump and valve parts and light-emitting diodes. The United States hiked tariffs on Chinese imports Friday and Beijing said it immediately retaliated in a dispute between the world's two biggest economies that President Donald Trump says he is prepared to escalate.

Trump is not happy with the U.S.'s large trade deficit with China and insists Beijing has used unfair and predatory tactics such as requiring US companies to hand over technology in exchange for access to China's market. Chinese officials reject accusations of theft and say no foreign company is obligated to share technology.

The Trump administration is confronting China over development tactics it says include stealing technology or pressuring foreign companies to hand it over.

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 decision to impose tariffs on Chinese goods will harm American consumers and businesses without addressing discriminatory and systemic Chinese trade practices and policies", said Josh Kallmer, executive vice president for policy at the Information Technology Industry Council, a trade association for the communications technology industry.

Widely-read tabloid the Global Times, published by the ruling Communist Party's People's Daily, said the increasingly likely trade war would bring chaos to the world.

China has threatened to respond with tariffs on hundreds of US goods, including top exports such as soybeans, sorghum and cotton, threatening USA farmers in states that backed Trump in the 2016 USA election, such as Texas and Iowa.

China's ministry of commerce said Trump had started "the largest trade war in history".

Japan's main stock index, the Nikkei 225, gained 1.1 percent while the Shanghai Composite Index added 0.5 percent. Beijing has announced reforms this year including ending limits on foreign ownership in its auto industry, but none directly addresses complaints that are fueling its conflict with Washington.

After that, the hostilities could intensify: Trump said Washington is ready to target an additional $200 billion in Chinese imports - and then $300 billion more - if Beijing does not yield.

The US imported $505 billion of goods from China previous year. 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.

"By threatening unilateral action without having any allies and not reducing domestic discord on trade, the Trump administration has invited China to stand tough", said Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies.

The official China Daily said the United States was intentionally trying to prevent China from developing to keep it from challenging the former's role in the global economic order.

There was no evidence of any last-minute negotiations between USA and Chinese officials, business sources in Washington and Beijing said.

Maarten-Jan Bakkum, a strategist at NN Investment Partners, a Netherlands-based asset manager, said in emailed comments that "protectionist measures by one country could potentially spiral out of control, leading to more retaliation by more countries, eventually affecting a bigger share of Chinese (emerging market) and global exports".

Foreign companies accounted for $20 billion, or 59 percent, of the $34 billion of exports from China that would be subject to new US tariffs, with USA firms accounting for a significant part of that 59 percent, Gao said.

The American Chamber of Commerce in China appealed to both sides to negotiate. Companies want fairer treatment but will be hurt by U.S.

Asked whether USA companies would be targeted with "qualitative measures" in China in a trade war, Gao said the government would protect the legal rights of all foreign companies in the country. -Chinese tensions, Zarit said. "At that point, the U.S. will be more interested in negotiations, and the Chinese side will also want to come to the table".

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