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How a US-China trade war might play out

How a US-China trade war might play out

US President Donald Trump on Friday ignited his trade war with China, slapping tariffs on tens of billions in Chinese imports and sparking immediate retaliation from Beijing.

Before the market opened Friday Trump announced that the United States will implement a 25 percent tariff on $50 billion of goods from China related to intellectual property and technology, and pledged to impose further levies if China retaliates.

"We will immediately launch tariff measures that will match the scale and intensity of those launched by the United States", the ministry said, announcing its own 25 percent tariffs on $50 billion of USA exports.

The Chinese commerce ministry announced that it would place equal tariffs on US goods, and said that all previous trade agreements with the USA are no longer valid.

Beijing will impose tariffs on 545 U.S. items worth $34 billion - including agricultural products, automobiles and seafood - starting on July 6. Air freight is highly seasonal, with prices spiking in the fall as Christmas gifts are sent to stores and consumers.

The American Soybean Association, which represents more than 300,000 soybean farmers, appealed to Congress last week to halt trade tariffs. By May, the cost of laundry equipment had jumped 17 percent from two months earlier, according to government data. Europe, Japan and other trading partners raise similar complaints, but Trump has been unusually direct about challenging Beijing and threatening to disrupt such a large volume of exports.

The US imported US$506 billion of goods from China a year ago and exported about US$130 billion, leaving a 2017 deficit of US$376 billion, according to government figures.

Washington and Beijing appeared increasingly headed toward open trade conflict after several rounds of negotiations failed to resolve US complaints over Chinese industrial policies, lack of market access in China and a $375 billion USA trade deficit.

China's refusal to get intimidated by the U.S. sanctions shows "it is hard to see a path to a negotiated settlement that avoids a big hit to trade and investment flows between the two countries", the Washington Post quoted Eswar Prasad, former head of the International Monetary Fund's China division, as saying.

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The United States accuses China of using predatory tactics in a breakneck effort to supplant American technological supremacy.

"I don't want China cheating on us", said Bill Gordon who grows corn and soybeans on a 2,000-acre family farm in Worthington, Minn.

Trump's expansion of unilateral trade action goes well beyond recent actions from the United States. -China Business Council says she suspects Beijing will wait to see whether the United States actually puts the USA tariffs into effect July 6 before it starts taxing US goods.

How will USA consumers and businesses be affected? He has already threatened to put tariffs on an additional $100 billion of Chinese goods. They included a variety of agricultural products, including soybeans, corn and wheat along with beef, pork and poultry, plus automobiles.

Xi told Pompeo he hoped that the United States could "cautiously and appropriately" handle sensitive issues to avoid "major disturbances" to Sino-U.S. ties, the Chinese Foreign Ministry said in a statement.

"There is no trade war".

The Trump administration in May also assessed steel and aluminum tariffs on Canada, the European Union and Mexico.

Wall Street has viewed the trade tensions with concern, fearful that they could strangle economic growth and undermine the benefits of the tax cuts Trump signed into law previous year. Senate Minority Leader Chuck Schumer, D-N.Y., said Trump was "right on target".


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