Published: Mon, July 09, 2018
Markets | By Noel Gibbs

It’s on: US, China tariffs take effect in new trade war

It’s on: US, China tariffs take effect in new trade war

BEIJING, July 6 - China said today it was "forced to take necessary countermeasures", after Washington launched what Beijing called "the largest trade war in economic history", imposing tariffs on billions of dollars in Chinese imports.

"The United States has waged the biggest trade war in economic history against the rules of the World Trade Organization", China's Commerce Ministry said in a statement, describing the US tariffs as "textbook trade hegemony". "For example, world-leading semiconductor companies are upset that chips made in the US and sent to China for assembly or testing will face a high tariff on their total value when they return".

There was confusion about exactly what USA products would be hit in the initial wave of tariffs as China's Commerce Ministry had not published an updated list.

The tariffs are bound to adversely affect many USA industries and could be passed on to American consumers in the form of higher prices.

The U.S. goods trade deficit with China increased significantly in May, a Commerce Department report showed on Friday, as the United States and China lunged into a tit-for-tat trade war ignited by President Donald Trump.

President Trump, on Thursday, warned there is more to come, with tariffs on more than $500 billion of goods possible in subsequent rounds.

US firms in China are reporting increases in random inspections.

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Last week's European Union bailout package for Germany may not have worked in spite of Greece agreeing to help. Experts say an increase in USA tariffs could pose a serious challenge to European auto-makers.

Distillers are anxious that retaliatory tariffs, not only from China but Europe and Canada as well, could stunt their sales and slow expansion and hiring plans.

Last month, the European Union imposed tariffs on American goods worth Dollars 3 billion such as yachts, bourbon and motorcycles.

U.S. tariffs on $34bn (£25.7bn) of Chinese goods came into effect on Friday.

"There should be no doubting Beijing's resolve", the newspaper said.

"After the United States introduced the new tariffs, China's reciprocal measures also immediately took effect", said the spokesman for the Chinese Foreign Ministry Lu Kang.

USA customs officials will begin collecting an additional 25 percent tariff on imports from China of goods ranging from farming plows to semiconductors and airplane parts. The U.S. exported 30 percent of its overall soybean production to China past year.

China's government also announced it was adding this round of United States tariffs to an existing complaint filed with the WTO in April shortly after Washington unveiled the threat to punish Beijing for its policies on intellectual property.

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The Trump administration contends China has deployed predatory tactics in a push to overtake US technological dominance.

Under the snippy headline " So much trade losing", the lead editorial compared the Trump trade war to the start of Civil War that led to nothing but tragedy for the rebels of the South.

The conflict between the world's two biggest economies reflects chronic tension in their relationship as customers, business partners, and increasingly competitors.

Supply chains will also be negatively affected, said Cliff Tan, head of global market researchat Japan's MUFG Bank in Hong Kong.

But if the trade war continues into the spring of 2019, the owners of thousands of smaller farms, many handed down from generation to generation, could face tough decisions, pitting their pocketbooks against the president's policies. Heidi Heitkamp, D-N.D., highlighted further uncertainty caused by the renegotiation of the North American Free Trade Agreement and tariffs on steel and aluminum imports.

Economists say that if the back-and-forth stops there, the overall impact on both economies will be minimal even though some industries will suffer.

Mr Trump said: "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?"

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The index closed lower by 0.27 percent at 6,177.80, with consumer stocks and gold producers recording the steepest declines . The Hong Kong market remained choppy and was last down 1.9 percent, while the Shanghai bourse edged up 0.05 percent.

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