BEIJING/WASHINGTON (Reuters) – A U.S.-China trade fight resulting in duties on $34 billion worth of each other’s imports was seen dragging on for a potentially prolonged period, as Washington and Beijing flexed their muscles with no sign of negotiations to ease tensions.
Friday marked the start of the U.S. duties that were promptly met with retribution by China, as Beijing accused the United States of triggering the “largest-scale trade war.”
The escalating fight between the world’s two biggest economies meant that it could “take economic and political pain to get these two parties to the (negotiating) table,” said Scott Kennedy, head of China studies at the Center for Strategic and International Studies in Washington.
President Donald Trump already is threatening additional rounds of tariffs, possibly targeting over $500 billion worth of Chinese goods, or roughly the total amount of U.S. imports from China last year.
It will take weeks to months for the U.S. Trade Representative to review and possibly activate any new rounds of punishment.
“The key questions during that time are what will happen to financial markets, how will U.S. voters react and will China’s economy start to wobble,” Kennedy said in a telephone interview.
Erin Ennis, senior vice president of the U.S. China Business Council, said there was a danger the two sides will dig in on trade sanctions, without a clear strategy for resuming negotiations.
While U.S. companies doing business in China agree with Trump’s complaint about Chinese intellectual property practices, Ennis said they do not see tariffs pushing China into submission.
China’s commerce ministry said it was forced to retaliate, meaning imported U.S. goods including cars, soybeans, and lobsters also faced 25 percent tariffs.
Some of Trump’s fellow Republicans in the U.S. Congress lashed out at his actions.
“Tariffs not only hurt our farmers, ranchers and airplane manufacturers, but they also harm every American consumer. We should be working with our allies to isolate China rather than escalate a trade war,” said Senator Jerry Moran, who represents the agriculture-heavy state of Kansas.
China’s soymeal futures fell more than 2 percent on Friday afternoon before recovering most of those losses, amid initial market confusion over whether Beijing had actually implemented the tariffs, which it later confirmed it had.
Friday’s long-expected China tariff volley fueled fear that a prolonged and escalating battle would hurt global trade, investment and growth, while also damaging U.S. farm exports and potentially driving up food prices in China.
For example, U.S.-based audio company Sonos Inc, in an initial public offering on Friday, noted its performance “may be materially harmed” by trade restrictions.
“Trade war is never a solution,” Chinese Premier Li Keqiang said at a news briefing with Bulgarian Prime Minister Boyko Borissov in Sofia before a summit with 16 central and eastern European countries.
“China would never start a trade war but if any party resorts to an increase of tariffs, then China will take measures in response to protect development interests.”
In the run-up to Friday, there was no sign of renewed negotiations between U.S. and Chinese officials, business sources in Washington and Beijing said.
The dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent weeks.
China lodged a case with the World Trade Organisation (WTO) against the United States, its commerce ministry said on Friday.
White House Council of Economic Advisers Chairman Kevin Hassett, in an interview on Fox Business Network on Friday, said Trump is “going to deliver better (trade) deals.” He added that for now, “He’s called the bluff of other countries that have basically been abusing” U.S. companies and workers.
To view a graphic on U.S. trade with China, click: tmsnrt.rs/2KAT34a
Importers of American retail goods hit by higher Chinese duties were reluctant to pass the costs on to consumers for now.
An analysis of over four dozen targeted U.S products showed that prices were little changed on Friday afternoon from earlier in the week. The products, sold on Chinese e-commerce platforms, ranged from pet food to mixed nuts and whiskey.
Ford Motor Co said on Thursday that for now, it will not hike prices of imported Ford and higher-margin luxury Lincoln models in China. But German automaker BMW said it is unable to “completely absorb” new Chinese tariff on imported U.S.-made models and will raise prices.
U.S. stocks shook off the tariffs, which investors said had been well-anticipated and priced-in. The S&P 500 rose to a two-week high on Friday, partly buoyed by strong U.S. jobs growth. However, investors said that a significant escalation in tension would cause worries to set in.
Companies seeking product exclusions from tariffs on Chinese goods imported into the United States will get 90 days to file such requests, the U.S. Trade Representative’s office said on Friday.
To view a graphic on China trade with US, click: reut.rs/2HjTuSw
‘GANG OF HOODLUMS’
Chinese state media slammed Trump’s trade policies and on Friday likened his administration to a “gang of hoodlums.”
China’s commerce ministry called the U.S. actions “a violation of world trade rules” and said that it had “initiated the largest-scale trade war in economic history.”
Trump has railed against Beijing for intellectual property theft, barriers to entry for U.S. businesses and a $375 billion U.S. trade deficit with China.
A China central bank adviser said the planned U.S. import tariffs on $50 billion worth of Chinese goods – $34 billion plus a planned follow-on list worth $16 billion – will cut China’s economic growth by 0.2 percentage points, the official Xinhua news agency reported Friday.
China’s tariff list is heavy on agricultural goods such as soybeans, sorghum and cotton, threatening U.S. farmers in states that backed Trump in the 2016 U.S. election, such as Texas and Iowa.
To view a graphic on Industry impact, click: reut.rs/2IVkPHd
To view a graphic on the Tit-for-tat impact, click: tmsnrt.rs/2GXE9qr
Slideshow (7 Images)
Reporting by Adam Jourdan in SHANGHAI, Michael Martina, Christian Shepherd, Dominique Patton, Elias Glenn and Josephine Mason in BEIJING, David Lawder, Jeff Mason and Justin Mitchell in WASHINGTON, Meg Shen in HONG KONG and Tsvetelia Tsolova in SOFIA; Writing by Tony Munroe and Richard Cowan; Editing by Sam Holmes, Shri Navaratnam, Nick Macfie and Nick Zieminski